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		$10.00	per direct labor-hour
Machine processing		$5.00	per machine-hour
Machine setups		$35.00	per setup
Production orders		$170.00	per order
Shipments		$110.00	per shipment
Product sustaining		$775.00	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	925	50
Machine-hours	2,400	40
Machine setups	11	2
Production orders	11	2
Shipments	22	2
Product sustaining	2	2

  

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 $0 $0

Answer 1

Answer:

Activity Cost Pool	K425	M68
Supporting direct labor	9250	500
Machine processing	12000	200
Machine setups	385	70
Production orders	1870	340
Shipments	2420	220
Product sustaining	1550	1550
Total overhead cost	27475	2880

Working notes for the above answer is as under

K425

Activity Cost Pool	Activity Rate		Activity	ABC Cost
K425	A		B	C=A*B
Supporting direct labor	10	per direct labor-hour	925	9250
Machine processing	5	per machine-hour	2400	12000
Machine setups	35	per setup	11	385
Production orders	170	per order	11	1870
Shipments	110	per shipment	22	2420
Product sustaining	775	per product	2	1550
Total overhead cost				27475

M-67

	Activity Rate		Activity	ABC Cost
M67	A		B	C=A*B
Supporting direct labor	10	per direct labor-hour	50	500
Machine processing	5	per machine-hour	40	200
Machine setups	35	per setup	2	70
Production orders	170	per order	2	340
Shipments	110	per shipment	2	220
Product sustaining	775	per product	2	1550
Total overhead cost				2880