Sarno Corporation has an activity-based costing system with three activity cost pools- Processing, Batch Setup,...
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Accounting
Sarno Corporation has an activity-based costing system with three activity cost pools- Processing, Batch Setup, and Other. Costs in the Processing cost pool are assigned to products based on machine-hours (MHs) and costs in the Batch Setup 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:
Activity Cost Pools
Processing
$3,000
Batch Setup
$9,800
Other
$9,200
MHs
Batches
Product #1
5,800
700
Product #2
4,200
300
Total
10,000
1,000
Product #1
Product #2
Sales (total)
$45,300
$48,400
Direct materials (total)
$19,600
$16,900
Direct labor (total)
$15,900
$24,200
Required:
a. Calculate activity rates for each activity cost pool using activity-based costing.
b. Determine the amount of overhead cost that would be assigned to each product using activity-based costing.
c. Determine the product margins for each product using activity-based costing.
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