Groleau Corporation has an activity-based costing system with three activity cos
ID: 2563041 • Letter: G
Question
Groleau Corporation has an activity-based costing system with three activity cost pools--Processing, Setting Up, and Other. The company's overhead costs, which consist of factory utilities and indirect labor, are allocated to the cost pools in proportion to the activity cost pools' consumption of resources. Costs in the Processing 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. Data concerning the two products and the company's costs and activity-based costing system appear below:
Distribution of Resource Consumption Across Activity Cost Pools
Required:
a. Assign overhead costs to activity cost pools using activity-based costing.
b. Calculate activity rates for each activity cost pool using activity-based costing.
c. Determine the amount of overhead cost that would be assigned to each product using activity-based costing.
d. Determine the product margins for each product using activity-based costing.
Factory utilities (total) $ 38,900 Indirect labor (total) $ 12,400Explanation / Answer
ReqA: Allocation of overhead to Activity Processing Setup Other Factory utilities 19450 3890 15560 ($38900 in 0.5:0.1: 0.40) Indirect labour 3720 1240 7440 ($12400 in 0.30: 0.10: 0.60) Total Overheads 23170 5130 23000 ReqB: Processing Setup Total Overheads as computed above 23170 5130 Cost drivers Total machine hours 11100 Number of batches 1300 Cost per driver 2.09 per MH 3.95 per batch Note: Other cost cannot be allocated as per question. Req C: Amount of overhead allocated to Product Product S8 Product F1 Machine hours 3800 7300 Number of batchs 900 400 Overhead cost: Processing(@2.09 per MH) 7942 15257 Setup(@3.95 per batch) 3555 1580 Total overhead cost 11497 16837 Req D: Product margin Product S8 Product F1 Sales revenue 72300 99500 Less: Cost Material 22500 32700 Labour 33900 44400 Overheads 11497 16837 Total cost 67897 93937 Product margin 4403 5563
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