1 answer

Musich Corporation has an activity-based costing system with three activity cost pools--Machining, Setting Up, and Other....

Question:

Musich Corporation has an activity-based costing system with three activity cost pools--Machining, Setting Up, and Other. The company's overhead costs, which consist of equipment depreciation and indirect labor, have been allocated to the cost pools already and are provided in the table below.

                                                               Activity Cost Pools

Machining

Setting Up

Other

Total

Equipment depreciation

$

9000

$

47,700

$

23,400

$

80,100

Indirect labor

3900

2700

3900

10,500

Total

$

12,900

$

50,400

$

27,300

$

90,600

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. Data concerning the two products and the company's costs appear below:

MHs

Batches

Product Z3

5800

650

Product T1

6000

1250

Total

11,800

1900

                                                                                        Product Z3      Product T1

Sales (total)

$

226,800

$

253,500

Direct materials (total)

$

83,000

$

97,200

Direct labor (total)

$

109,600

$

104,200

Required:

Calculate the following:

Machining Activity Rate

$

Setting up Activity Rate

$

Amount of OH applied to product Z3 (round to the nearest dollar)

$

Amount of OH applied to product T1 (round to the nearest dollar)

$

Product Margin – Z3 (round to the nearest dollar)

$

Product Margin – T1 (round to the nearest dollar)

$


Answers

Solutions:

E Н K N 3 SOLUTION 1: 4. Computation of Activity rates Cost assigned Total activity level $12,900 Activity rate $1.09 5 Cost

.

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