Spendlove Corporation has provided the following data from its activity-based co

Question

Spendlove Corporation has provided the following data from its activity-based costing system: Activity Cost Pool Total Cost Total Activity Assembly $1,114,920 57,000 machine hours Processing Orders $47,016 1,800 orders Inspection $ 107,328 1,560 inspection-hours

The company makes 430 units of product S78N a year, requiring a total of 1,120 machine-hours, 40 orders, and 30 inspection-hours per year. The product's direct materials cost is $49.81 per unit and its direct labor cost is $12.34 per unit. The product sells for $129.90 per unit. According to the activity-based costing system, the product margin for product S78N is:

A. $4,116.50

B. $29,132.50 x

C. $6,180.50 x

D. $5,161.30

Please show work.

Explanation / Answer

According to the activity-based costing system, the product margin for product S78N is:

Net Income = Sales - Total Costs

= 430 x 129.90 - 430 x (49.81+12.34) - 25016 = > 55857 - 26724.5 - 25016 = $4116.5

Option A is correct.

A. $4,116.50

Activity Cost Pool Total Cost Total Activity Cost per Activity Cost per Activity Activities for total 430 units Cost for 430 unit Activities Assembly $1,114,920 57,000 machine hours (1114920/57000) 19.56 1120 21907.2 Processing Orders $47,016 1,800 orders (47016/1800) 26.12 40 1044.8 Inspection $107,328 1,560 inspection-hours (107328/1560) 68.8 30 2064 Total Cost 25016

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