Klumper Corporation is a diversified manufacturer of industrial goods. The compa

Question

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 Activity Rates Supporting direct labor $ 11 per direct labor-hour Machine processing $ 4 per machine-hour Machine setups $ 45 per setup Production orders $ 160 per order Shipments $ 120 per shipment Product sustaining $ 825 per product Activity data have been supplied for the following two products: Total Expected Activity K425 M67 Number of units produced per year 200 2,000 Direct labor-hours 925 60 Machine-hours 2,800 50 Machine setups 7 2 Production orders 7 2 Shipments 14 2 Product sustaining 2 2 Required: How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system?

Explanation / Answer

Solution:

We are given the company's activity based costing system that contains the following six activity cost pools and activity rates.

Now the activity data that have been supplied for the following two products:

Now we are required to determine the total overhead cost that would be assigned to each of the product listed

above in activity based costing system.

Activity cost pool Activity Rates Supporting direct labor $ 11 Machine processing $ 4 Machine setups $ 45 Production order $ 160 Shipment $ 120 Product sustaining $ 825

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