What is the product margin for Product M5 under activity-based costing? Mirabile

Question

What is the product margin for Product M5 under activity-based costing?

Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools-Processing, Supervising, and Other. The costs in those activity cost pools appear below: Processing 6,630 Supervising $38,520 Other $12,300 Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below: MHS Batches (Processing) (Supervising) Product MO Product M5 Total 12,300 700 13,000 900 900 1,800 Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins Product Product MO M5 Sales (total) Direct materials (total) $30,400 $33,300 Direct labor (total) $87,900 $99,400 $29,700 $43,600

Explanation / Answer

Product M5 Sales 99,400 Direct materials 33,300 Direct labour 43,600 Processing costs (6,630*700/13,000) 357 Supervising costs (38,520*900/1,800) 19,260 Product margin 2,883

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