Zumbrunnen Corporation uses activity-based costing to compute product margins. O
ID: 2653495 • Letter: Z
Question
Zumbrunnen Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools-Processing, Supervising, and Other. The costs in those activity cost pools appear below:
Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
24,500
1,600
Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.
What is the overhead cost assigned to Product H2 under activity-based costing?
$41,000
$10,920
$21,735
$32,655
Zumbrunnen Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools-Processing, Supervising, and Other. The costs in those activity cost pools appear below:
Explanation / Answer
Solution:
Overhead cost assigned to Product H2 under activity-based costing
Processing Cost of H2 = ($ 14,700 * Machine hours of H2) / Total Machine Hours
= $ 14,700 * 18,200/ 24,500
= $ 10,920
Supervisning Cost = ( $ 77,280 * Supervising Hours of H2) / Total Hours
= $ 77,280 * 450 / 1,600
= $ 21,735
Total Overhaed Cost = Processing Cost of H2 + Supervisning Cost
= $ 10920 + $ 21,735 = $ 32,655
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