Pressler Corporation\'s activity-based costing system has three activity cost po

Question

Pressler Corporation's activity-based costing system has three activity cost pools-Machining, Setting Up, and Other. The company's overhead costs, which consist of equipment depreciation and indirect labor, are allocated to the cost pools in proportion to the activity cost pools' consumption of resources.

Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products.

Additional data concerning the company's products appears below:

Assign overhead costs to activity cost pools using activity-based costing. (Omit the "$" sign in your response.)

Activity Cost Pools

Calculate activity rates for each activity cost pool using activity-based costing. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

Determine the amount of overhead cost that would be assigned to each product using activity-based costing. (Omit the "$" sign in your response.)

Determine the product margins for each product using activity-based costing. (Omit the "$" sign in your response.)

  Equipment depreciation (total) $ 34,400   Indirect labor (total) $ 7,730

Explanation / Answer

Overhead costs

Distribution of Resources Consumption Across Activity Cost Pools

Products

Product S4

Product S4

Overhead costs

  Equipment depreciation (total)                          34,400   Indirect labor (total)                             7,730

Distribution of Resources Consumption Across Activity Cost Pools

Machining Setting up Other   Equipment depreciation 0.3 0.3 0.4   Indirect labor 0.4 0.2 0.4

Products

MHs Batches   Product S4                          14,700                        700   Product V6                             5,300                    1,500   Total                          20,000                    2,200

Product S4

Product V6   Sales (total)                    81,500.00            69,000.00 $   Direct materials (total)                    25,800.00            28,500.00 $   Direct labor (total)                    41,000.00            25,800.00 $ Activity Cost Pools Ans a.          Machining          Setting up         Other           Total   Equipment depreciation                          10,320                  10,320            13,760            34,400   Indirect labor                             3,092                    1,546              3,092              7,730   Total $                      13,412 $              11,866 $        16,852 $        42,130 Ans b.               Activity Rate   Machining $                           0.67 per MH   Setting up $                           5.39 per batch Ans c.       Product S4       Product V6   Machining                       9,857.82              3,554.18   Setting up                       3,775.55              8,090.45    Total $                      13,633 $              11,645 Ans d. Profit Margin

Product S4

Product V6   Sales (total)                    81,500.00            69,000.00   Direct materials (total)                    25,800.00            28,500.00   Direct labor (total)                    41,000.00            25,800.00 Overhead as per ABC $                      13,633 $              11,645 Net Profit Margin $                        1,067 $                3,055

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