Question

Howell Corporation's activity-based costing system has three activity cost pools--Machining, Setting Up, and Other. The company's overhead costs, which consist of equipment depreciation and indirect labor, are allocated to the cost pools in proportion to the activity cost pools' consumption of resources.

Equipment depreciation (total)	$	27,500
Indirect labor (total)	$	7,500

Distribution of Resource Consumption Across Activity Cost Pools

	Machining	Setting Up	Other
Equipment depreciation	0.30	0.20	0.50
Indirect labor	0.40	0.40	0.20

Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products.

	MHs	Batches
Product S4	10,400	700
Product C0	4,200	1,800
Total	14,600	2,500

Additional data concerning the company's products appears below:

	Product S4			Product C0
Sales (total)	$	86,700		$	73,900
Direct materials (total)	$	29,800		$	20,200
Direct labor (total)	$	39,800		$	35,000

Required:

a. Assign overhead costs to activity cost pools using activity-based costing.

b. Calculate activity rates for each activity cost pool using activity-based costing.

c. Determine the amount of overhead cost that would be assigned to each product using activity-based costing.

d. Determine the product margins for each product using activity-based costing.

Answer 1