Question

Pinnocle Corporation has provided the following data from its activity-based costing system: Activity Cost Pool Total Cost Total Activity Assembly $ 1,533,840 77,000 machine-hours Processing orders 91,065 1,950 orders Inspection 139,788 1,980 inspection-hours The company makes 430 units of product S78N a year, requiring a total of 660 machine-hours, 50 orders, and 10 inspection-hours per year. The product's direct materials cost is $51.25 per unit and its direct labor cost is $13.06 per unit. The product sells for $124.30 per unit. According to the activity-based costing system, the product margin for product S78N is: Multiple Choice $10,313.50. $25,795.70. $11,942.50. $9,607.50.

Answer 1

Product margin= $9,607.5

Step-by-step explanation:

First, we need to calculate the allocation rates:

Assembly= 1,533,840 / 77,000= $19.92 per machine-hour

Processing orders= 91,065 / 1,950= $46.7 per order

Inspection= 139,788 / 1,980= $70.6 per inspection-hour

Now, we need to allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Assembly= 19.92*660= 13,147.2

Processing orders= 46.7*50= 2,335

Inspection= 70.6*10= 706

Total= $16,188.2

Finally, the product margin for product S78N:

Product margin= 430* (124.3 - 51.25 - 13.06) - 16,188.2

Product margin= $9,607.5