Asked by Keely Messer on May 22, 2024
Verified
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. (Round your answers to 2 decimal places.) b. Determine the amount of overhead cost that would be assigned to each product using activity-based costing. (Round intermediate calculations to 2 decimal places.) c. Determine the product margins for each product using activity-based costing. (Round intermediate calculations to 2 decimal places.)
Activity-Based Costing
A costing methodology that assigns overhead and indirect costs to specific activities and then to products or services based on their consumption of those activities.
Machine-Hours
A measure of the amount of time machines are run in the production process, often used as a basis for allocating manufacturing overhead costs.
Batches
Quantities or groups of products produced or processed at the same time.
- Understand the principles of Activity-Based Costing (ABC).
- Calculate activity rates for various cost pools in an ABC system.
- Assign overhead costs to products using calculated activity rates.
Verified Answer
b. The overhead cost charged to Product D7 is:
The overhead cost charged to Product H0 is:
c. Determine product margins:
Learning Objectives
- Understand the principles of Activity-Based Costing (ABC).
- Calculate activity rates for various cost pools in an ABC system.
- Assign overhead costs to products using calculated activity rates.
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