Exercise 7-4 Second-Stage Allocation [L07-4] Klumper Corporation is a diversifie

Question

Exercise 7-4 Second-Stage Allocation [L07-4] Klumper Corporation is a diversified manufacturer of industrial goods. The company's activity based costing system contains the following six activity cost pools and activity rates: Activity Cost Pool Supporting direct per direct labor- $5.00 per machine-hour Machine processing Machine setups Production orders $40.00 per setup $150.00 per order $125.00 per shipment $800.00 per product Product sustaining Activity data have been supplied for the following two products: Total Expected Activi K425 M67 Number of units produced per20 200 2,000 Direct labor-hours Machine-hours Machine setups Production orders 1,075 60 3.40050 19 19 Product sustaining Required: Determine the total overhead cost that would be assigned to each of the products listed above in the activity-based costing system. K425 Supporting direct Shipments Product

Explanation / Answer

K425 M67 Supporting diect labor 8600 480 Machine processing 17000 250 Machine setups 760 80 Production orders 2850 300 Shipments 4750 250 Product sustaining 1600 1600 Total overhead 35560 2960 Alternatively: Product sustaining 800 800 Total overhead 34760 2160

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