Question: ABC Corporation's activity based costing system has three activity cost pools Machining, Setting Up, and other. The company's overhead costs, which consist of equipment depreciation
ABC Corporation's activity based costing system has three activity cost pools Machining, Setting Up, and other. The company's overhead costs, which consist of equipment depreciation and indirect labor, are allocated to the cost pools in proportion to the activity cost pools consumption of resources. Equipment Depreciation (total) Indirect Labor (total) AED 27,000 AED 7,000 Distribution of Resource Consumption Across Activity Cost Pools: Machining Setting Up Equipment Depreciation 0.40 0.30 Indirect Labor 0.20 0.30 Other 0.30 0.50 Costs in the Machining cost pools 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. MHS 8,100 Product S4 Product V6 Total Batches 400 1,600 2,000 1,900 10,000 Additional data concerning the company's products appear below: Sales (total) Direct Material (total) Direct Labor (total) Product S4 AED 71,400 AED 21,900 AED 33,700 Product V6 AED 57,600 AED 19,900 AED 25,100 Required: a) Determine the amount of overhead cost that would be assigned to each product using activity based costing b) Determine the product margins for each product using Activity Based Costing
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