Doede Corporation uses activity-based costing to compute product margins. In the

Question

Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment depreciation and supervisory expense--to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below:

Distribution of Resource Consumption Across Activity Cost Pools:

In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products.

Activity:

Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.

Sales and Direct Cost Data:

Sales and Direct Cost Data:

What is the product margin for Product W1 under activity-based costing?

-$12,800 A

$23,356 B

$7,996 C

$35,200 D

Explanation / Answer

Machining Order Filling Other Equipment depreciation 55200 18400 18400 Supervisory expense 1200 800 2000 Total 56400 19200 20400 Product W1 Sales 236500 Costs: Direct materials (total) 90900 Direct labor (total) 110400 Overhead: Machining 11844 =56400/20000*4200 Order Filling 15360 =19200/1000*800 Total costs 228504 Product margin 7996 Option C is correct

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