Klumper Corporation is a diversified manufacturer of industrial goods. The compa

Question

Klumper Corporation is a diversified manufacturer of industrial goods. The company’s activity-based costing system contains the following six activity cost pools and activity rates:

Activity data have been supplied for the following two products:

Total Expected Activity

Required:

How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system?

Activity Cost Pool Activity Rates Supporting direct labor $ 7 per direct labor-hour Machine processing $ 4 per machine-hour Machine setups $ 50 per setup Production orders $ 160 per order Shipments $ 125 per shipment Product sustaining $ 750 per product

Explanation / Answer

SOLUTION

K425

M67

Activity cost pool Activity rate Activity ABC cost ($) Supporting direct labor $7 per direct labor-hour 975 direct labor-hours 6,825 Machine processing $4 per machine-hour 3,200 machine-hours 12,800 Machine setups $50 per setup 15 setups 750 Production orders $160 per order 15 orders 2,400 Shipments $125 per shipment 30 shipments 3,750 Product sustaining $750 per product 2 product 1,500 Total overhead cost 28,025

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