Greife Corporation\'s activity-based costing system has three activity cost pool
ID: 2519777 • Letter: G
Question
Greife Corporation's activity-based costing system has three activity cost pools--Machining, Setting Up, and Other. The company's overhead costs have already been allocated to these cost pools as follows:
Machining $ 57,408
Setting Up $ 103,554
Other $ 21,700
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. The following table shows the machine-hours and number of batches associated with each of the company's two products:
MHs Batches Product K0 2,930 / 1,200
Product W9 8,110 / 780
Total 11,040 / 1,980
Additional data concerning the company's products appears below:
Product K0 Product W9 Sales (total) $ 265,000 / $ 227,000
Direct materials (total) $ 85,800 / $ 83,500
Direct labor (total) $ 96,400 / $ 59,100
Required: a. Calculate activity rates for each activity cost pool using activity-based costing.
b. Determine the amount of overhead cost that would be assigned to each product using activity-based costing.
c. Determine the product margins for each product using activity-based costing.
Explanation / Answer
Req a: STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL Activity Total Expected Activity ACTIVITY COST POOL Measures Overheads Activity Rate Machining MHs 57,408 11,040 5.20 Setting up Batches 103,554 1,980 52.30 Req b: Overheads Assigned Activity Rate Product KO Product W9 Activity OH cost Activity OH cost Machining 5.2 2930 15236 8110 42172 Setting up 52.3 1200 62760 780 40794 Total Overheads 77996 82966 Req c: Product KO Product W9 Sales revenue 265000 227000 Less: Cost Material 85800 83500 Labour 96400 59100 Others 77996 82966 Product margin 4804 1434
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