Question

Klumper Corporation is a diversified manufacturer of industrial goods. The company’s activity-based costing system contains the following six activity cost pools and activity rates: Activity Cost Pool Activity Rates Supporting direct labor $ 8 per direct labor-hour Machine processing $ 4 per machine-hour Machine setups $ 40 per setup Production orders $ 160 per order Shipments $ 115 per shipment Product sustaining $ 850 per product Activity data have been supplied for the following two products: Total Expected Activity K425 M67 Number of units produced per year 200 2,000 Direct labor-hours 975 30 Machine-hours 3,000 20 Machine setups 9 1 Production orders 9 1 Shipments 18 1 Product sustaining 1 1 Required: How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system?

Answer 1

Activity Cost Pool	Activity Rate(A)	Activity(B)	ABC Cost(A*B)
K425
Supporting Direct Labor	$8 Per Direct Labor Hour	975 hours	7800
Machine Processing	$4 per Machine Hour	3000 machine Hours	12000
Machine Setups	$40 per Setup	9 machine Setups	360
Production Order	$160 per order	9 production Order	1440
Shipments	$115 per Shipment	18 shipments	2070
Product Sustaining	$850 per product	1 product	850
Total Overhead Cost			24520
Activity Cost Pool	Activity Rate(A)	Activity(B)	ABC Cost(A*B)
M67
Supporting Direct Labor	$8 Per Direct Labor Hour	30 hours	240
Machine Processing	$4 per Machine Hour	20 machine Hours	80
Machine Setups	$40 per Setup	1 machine Setups	40
Production Order	$160 per order	1 production Order	160
Shipments	$115 per Shipment	1 shipments	115
Product Sustaining	$850 per product	1 product	850
Total Overhead Cost			1485

Activity Cost Pool	K25	M67
Supporting Direct Labor	7800	240
Machine Processing	12000	80
Machine Setups	360	40
Production Order	1440	160
Shipments	2070	115
Product Sustaining	850	850
Total Overhead Cost	24520	1485