Zwahlen Corporation has an activity-based costing system with three activity cos
ID: 2538076 • Letter: Z
Question
Zwahlen Corporation has an activity-based costing system with three activity cost pools--Processing, Setting Up, and Other. Costs in the Processing 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. Data concerning the two products and the company's costs and activity-based costing system appear below:
Activity Cost Pools
Required:
a. Calculate activity rates for each activity cost pool using activity-based costing.
b. Determine the amount of overhead cost that would be assigned to each product using activity-based costing.
c. Determine the product margins for each product using activity-based costing.
Processing $ 59,200 Setting Up $ 17,800 Other $ 30,200Explanation / Answer
a) Activity rate cost cost driver rate a b a/b processing 59,200 23,400 2.53 per machine hour set up 17,800 2,700 6.59 per batch b) overhead cost assinged MHS batches total mhs*2.53 batch*6.59 product D7 24540 6922 31462 answer product HO 34660 10878 45538 answer total 59200 17800 77000 c) product margin product D7 product HO Sales 223,800 309,600 less Direct materials 74,300 146,900 direct labor 106,570 97,900 overhead assigned 31462 45538 product margin 11,468 19,262
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