Handal Corporation uses activity-based costing to compute product margins. Overh

Question

Handal Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Machining, Order Filling, and Other. The costs in those activity cost pools appear below: Machining $15,800 Order Fillig 6,400 Other $ 9,800 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 data appear below: Orders (Order Filling) Product 04 Product Si (Machining) 4,800 15,200 300 1,700 Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins Product Product

Explanation / Answer

Order filling costs = 6,400

Order filling costs are assigned to products using number of orders.

Number of orders = 300 + 1,700 = 2,000

The activity rate for the order filling activity cost pool under activity based costing = 6,400 / 2,000

= 3.2 per order.

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