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		$9.00	per direct labor-hour
Machine processing		$4.00	per machine-hour
Machine setups		$40.00	per setup
Production orders		$160.00	per order
Shipments		$110.00	per shipment
Product sustaining		$875.00	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	1,150	50
Machine-hours	2,200	40
Machine setups	21	3
Production orders	21	3
Shipments	42	3
Product sustaining	3	3

  

Required:

Determine the total overhead cost that would be assigned to each of the products listed above in the activity-based costing system. Activity Cost Pool K425 M67 Supporting direct labor Machine processing Machine setups Production orders Shipments Product sustaining Total overhead cost

Answer 1

The correct answer is :

Activity Cost Pool	K425	M67
Supporting direct labor	10,350	450
Machine processing	8,800	160
Machine setups	840	120
Production orders	3,360	480
Shipments	4,620	330
Product sustaining	2,625	2,625
Total overhead cost	30,595	4,165

1. For K425 Overhead :

	K425	Activity Rate	Overhead Allocated ( Activity * Rate)
Direct labor-hours	1150	9	10,350
Machine-hours	2200	4	8,800
Machine setups	21	40	840
Production orders	21	160	3,360
Shipments	42	110	4,620
Product sustaining	3	875	2,625

2. For M67 Overhead :

	Activity Rate	M67	Overhead Allocated ( Activity * Rate)
Direct labor-hours	9	50	450
Machine-hours	4	40	160
Machine setups	40	3	120
Production orders	160	3	480
Shipments	110	3	330
Product sustaining	875	3	2,625