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 $ 3.00 per machine-hour Machine setups $ 40.00 per setup Production orders $ 150.00 per order Shipments $ 120.00 per shipment Product sustaining 800.00 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 3,200 40 Machine setups 15 2 Production orders 15 2 Shipments 30 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.

Answer 1

KLUMPER CORPORATION

TOTAL OVERHEAD COST OF K425 and M67

K425 M67

Supporting direct labor $9,250 $500

Machine Processing cost 9,600 120

Machine set-up 600 80

Production order 2,250 300

Shipment 3,600 240

Product sustaining 1,600 1,600

26,900 2,840

Step-by-step explanation:

workings

1. supporting direct labour cost :

K425 = $10 * 925 = $9250

M67 = $10* 50 = $500

2. machine processing cost

K425 = $3* 3200 = $9600

M67 = $3* 40 = $120

3. Machine set-up cost :

K425 = $40 * 15 = $600

M67 = $40* 2 = $80

4. Production order

K425 = $150 * 15 = $2,250

M67 = $150 * 2 = $300

5. Shipments cost :

K425 = $120*30 = $3,600

M67 = $120 * 2 = $240

6. Sustaning cost :

K425 = $800 * 2 = $1,600

M67 = $800 * 2 = $1,600