Hugle Corporation\'s activity-based costing system has three activity cost pools
ID: 2451362 • Letter: H
Question
Hugle Corporation's activity-based costing system has three activity cost pools-Machining, Setting Up, and Other. The company's overhead costs have already been allocated to these cost pools as follows:
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. The following table shows the machine-hours and number of batches associated with each of the company's two products:
Additional data concerning the company's products appears below:
Calculate activity rates for each activity cost pool using activity-based costing. (Round your intermediate calculations to 2 decimal places. Omit the "$" sign in your response.)
Determine the amount of overhead cost that would be assigned to each product using activity-based costing. (Round your intermediate calculations to 2 decimal places. Omit the "$" sign in your response.)
Determine the product margins for each product using activity-based costing. (Round your intermediate calculations to 2 decimal places. Omit the "$" sign in your response.)
Explanation / Answer
a
Calculation of activity rates for each activity cost pool using activity-based costing:
Cost Pool
Total Overhead Costs
Allocation Basis
Total Activity
Activity Rate
A
B
A/B
Machining
$ 37,158
Machine-hours (MHs)
11260
$ 3.30
Per MH
Setting up
$ 61,832
Number of batches
1180
$ 52.40
Per batch
Other
$ 20,200
NA
b
Calculation of amount of overhead cost that would be assigned:
Product E8
Activity
Activity Rate
Overhead Cost
A
B
A*B
Machining
2300
$ 3.30
$ 7,590.00
Setting up
860
$ 52.40
$ 45,064.00
Total
$ 52,654.00
Product V8
Activity
Activity Rate
Overhead Cost
A
B
A*B
Machining
8960
$ 3.30
$ 29,568.00
Setting up
320
$ 52.40
$ 16,768.00
Total
$ 46,336.00
c
Calculation of product margins for each product:
Product E8
Product V8
Sales (total)
$ 257,000.00
$ 211,000.00
Less: Direct materials (total)
$ 81,700.00
$ 89,700.00
Less: Direct labor (total)
$ 96,200.00
$ 61,300.00
Less: Overhead cost (total)
$ 52,654.00
$ 46,336.00
Product Margin
$ 26,446.00
$ 13,664.00
a
Calculation of activity rates for each activity cost pool using activity-based costing:
Cost Pool
Total Overhead Costs
Allocation Basis
Total Activity
Activity Rate
A
B
A/B
Machining
$ 37,158
Machine-hours (MHs)
11260
$ 3.30
Per MH
Setting up
$ 61,832
Number of batches
1180
$ 52.40
Per batch
Other
$ 20,200
NA
b
Calculation of amount of overhead cost that would be assigned:
Product E8
Activity
Activity Rate
Overhead Cost
A
B
A*B
Machining
2300
$ 3.30
$ 7,590.00
Setting up
860
$ 52.40
$ 45,064.00
Total
$ 52,654.00
Product V8
Activity
Activity Rate
Overhead Cost
A
B
A*B
Machining
8960
$ 3.30
$ 29,568.00
Setting up
320
$ 52.40
$ 16,768.00
Total
$ 46,336.00
c
Calculation of product margins for each product:
Product E8
Product V8
Sales (total)
$ 257,000.00
$ 211,000.00
Less: Direct materials (total)
$ 81,700.00
$ 89,700.00
Less: Direct labor (total)
$ 96,200.00
$ 61,300.00
Less: Overhead cost (total)
$ 52,654.00
$ 46,336.00
Product Margin
$ 26,446.00
$ 13,664.00
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