Kenrick Corporation uses activity-based costing to compute product margins. In t

Question

Kenrick Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts-equipment expense and indirect labor-to three activity cost pools-Processing, Supervising, and Other-based on resource consumption. Data to perform these allocations appear below: In the second stage, Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products user the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products folio Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins. What is the product margin for Product U4 under activity-based costing?

Explanation / Answer

Product U4 Sales          58,400 Direct Materials          26,900 Direct Labor          25,000 Equipment Expense : Processing             990 Supervising          1,620 Other                 -              2,610 Indirect Labor Processing             330 Supervising             240 Other                570 Product Margin            3,320

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