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In: Accounting

Hyundai Corporation uses activity-based costing to compute its product margins. Overhead costs have already been allocated...

Hyundai Corporation uses activity-based costing to compute its product margins. Overhead costs have already been allocated to the company's three activity cost pools--Machining, Order Filling, and Other. The data related to those costs in the activity cost pools appears below:

Machining $ 10,952
Order Filling $ 25,604
Other $ 7,100

Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:

MHs
(Machining)
Orders (Order Filling)
Product O4 3,500 260
Product S1 11,300 1,220

Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.

Product O4 Product S1
Sales (total) $ 96,100 $ 102,600
Direct materials (total) $ 44,800 $ 34,000
Direct labor (total) $ 37,100 $ 38,200

What is the overhead cost assigned to Product S1 under activity-based costing? (Round the Intermediate calculation to two decimal places and your final answer to nearest whole dollar.)

Solutions

Expert Solution

Answer-----------$29,468

Working

Calculation of Activity rates
Activity Cost Pool Activity driver Overhead Cost (A) Expected Activity (B) Activity rate (A/B)
Machining Number of MHs $ 10,952 14800 $               0.74 Per MH
Order filling Number of Orders $ 25,604 1480 $             17.30 Per Order

.

Cost assigned to Product S1
Activity name Activity Rates Activity ABC Cost
(A) (B) (A x B)
Machining $             0.74              11,300.00 $ 8,362.00
Order filling $           17.30                1,220.00 $ 21,106.00
Total Overheads assigned $             29,468.00

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