Brisky Corporation uses activity-based costing to compute product margins. In th

Question

Brisky 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-Machlning, Order Filling, and Other-based on resource consumption. Data to perform these allocations appear below: In the second stage, Machining costs are assigned to products using machlne-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. Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins. What is the product margin for Product 13 under activity-based costing $6,774 $2,666 $3,446 $7,226

Explanation / Answer

Activity Cost Pools Machining Order filing Others Total Equipment Depreciation %                           0.60                        0.30                0.10 Supervisory Expense %                           0.60                        0.20                0.20 OH cost Equipment depreciation alloaction                49,200.00             24,600.00        8,200.00        82,000.00 OH Cost Supervisory Expense Allocation                  7,260.00               2,420.00        2,420.00        12,100.00 Total 1st stage allocation                56,460.00             27,020.00     10,620.00 Product I3 Product U8 Total MHs                    5,480.00             19,500.00     24,980.00 % MHs 22% 78% Order filing                      197.00                   948.00        1,145.00 % Order filing 17% 83% Machining cost allocation                12,385.94             44,074.06     56,460.00 Order filing cost allocation                  4,648.86             22,371.14     27,020.00 Direct Materials                30,000.00             14,900.00 Direct Labor                21,900.00             26,000.00 TotAl cost                68,934.80           107,345.20 Sales revenue                71,600.00             65,200.00 Product Margin                  2,665.20           (42,145.20) So product margin for I3= $              2,666.00 approx

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