(Show work) Goold Corporation uses activity-based costing to compute product mar
ID: 2362703 • Letter: #
Question
(Show work) Goold Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools-Machining, Order Filling, and Other. The costs in those activity cost pools appear below: Machining costs are assigned to products using machine-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. Activity data appear below: Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins. The activity rate for Machining under activity-based costing is closest to: (show work) A. $0.11 per MH B. $0.80 per MH C. $0.16 per MH D. $1.43 per MHExplanation / Answer
Cleaning $442068 / 78800 hours = $5.61 per hour
Job Support $52801 / 1900 jobs = $27.79 per job
Client Support $9170 / 350 clients = $26.20 per client
b. Using the activity-based costing system, compute the customer margin of the Lason family. Round off all calculations to the nearest whole cent.
5.61 x 92 = $516.12
27.79 x 46 = $1,278.34
26.20 x 1 = $26.20
516.12 + 1,278.34 + 26.20 = 1,820.66
2,230 - 1,820.66 = $409.34 Margin
c. Assume the company decides instead to use a traditional costing system in which ALL costs are allocated to customers on the basis of cleaning hours. Compute the margin for the Lason family. Round all calculations to the nearest whole cent.
614,039 / 78,800 = $7.79 per hour
7.79 x 92 = $716.68
2,230 - 716.68 = $1,513.22
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