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 $ 7 per direct labor-hour Machine processing $ 3 per machine-hour Machine setups $ 40 per setup Production orders $ 160 per order Shipments $ 110 per shipment Product sustaining $ 775 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 1,125 50 Machine-hours 3,200 40 Machine setups 19 1 Production orders 19 1 Shipments 38 1 Product sustaining 1 1

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 M67Supporting Direct Labor Machine Processing Machine Setups Production Orders Shipments Product Sustaining Total Overhead Cost

Answer 1

Activity Cost Pool Activity Rates

Supporting direct labor $7 per direct labor-hour

Machine processing $3 per machine-hour

Machine setups $40 per setup

Production orders $160 per order

Shipments $110 per shipment

Product sustaining $775 per product

Expected Activity K425 total overhead costs

Direct labor-hours 1,125 = 1,125 x $7 = $7,875

Machine-hours 3,200 = 3,200 x $3 = $9,600

Machine setups 19 = 19 x $40 = $760

Production orders 19 = 19 x $160 = $3,040

Shipments 38 = 38 x $110 = $4,180

Product sustaining 1 = 1 x $775 = $775

total overhead costs $26,230

Expected Activity M67 total overhead costs

Direct labor-hours 50 = 50 x $7 = $350

Machine-hours 40 = 40 x $3 = $120

Machine setups 1 = 1 x $40 = $40

Production orders 1 = 1 x $160 = $160

Shipments 1 = 1 x $110 = $110

Product sustaining 1 = 1 x $775 = $775

total overhead costs $1,555