Groleau Corporation has an activity-based costing system withthree activity cost pools--Processing, Setting Up, and Other. Thecompany's overhead costs, which consist of factory utilities andindirect labor, are allocated to the cost pools in proportion tothe activity cost pools' consumption of resources. Costs in theProcessing cost pool are assigned to products based onmachine-hours (MHs) and costs in the Setting Up cost pool areassigned to products based on the number of batches. Costs in theOther cost pool are not assigned to products. Data concerning thetwo products and the company's costs and activity-based costingsystem appear below:
| |
| Factory utilities (total) | $ | 34,100 |
| Indirect labor (total) | $ | 10,900 |
|
Distribution of Resource Consumption Across Activity CostPools
| Processing | Setting Up | Other |
| Factory utilities | 0.40 | 0.20 | 0.40 |
| Indirect labor | 0.30 | 0.30 | 0.40 |
|
| MHs | Batches |
| Product S8 | 3,300 | 1,300 |
| Product F1 | 7,100 | 800 |
| Total | 10,400 | 2,100 |
|
| Product S8 | Product F1 |
| Sales (total) | $ | 66,200 | $ | 97,800 |
| Direct materials (total) | $ | 22,900 | $ | 34,800 |
| Direct labor (total) | $ | 29,600 | $ | 43,700 |
|
Required:
a. Assign overhead costs to activity cost pools usingactivity-based costing.
b. Calculate activity rates for each activity cost pool usingactivity-based costing.
c. Determine the amount of overhead cost that would be assignedto each product using activity-based costing.
d. Determine the product margins for each product usingactivity-based costing.
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| | Activity Cost Pools | | | Processing | Setting Up | Other | Total | | Factory utilities | | | | | | Indirect labor | | | | | | Total | | | | |
|
| Activity Cost Pools | Activity Rate |
| Processing | | per MH |
| Setting up | | per batch |
|
| | Amount of Overhead Cost | | Product S8 | | | Product F1 | |
|
|
| | Product Margin | | Product S8 | | | Product F1 | |
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