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Problem - COVID 20 Corporation has an activity-based costing system with three activity cost pools- Machining, Batch Setup, and Other. The company's overhead costs, which consist of equipment depreciation and indirect labor, have been allocated to the cost pools already and are provided in the table below.
Activity Cost Pools
Machining
Setting Up
Other
Total
Equipment Depreciation ($)
27,200
6,800
34,000
68,000
Indirect Labor ($)
2,500
1,000
1,500
5,000
Total ($)
29,700
7,800
35,500
73,000
Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Batch Setup 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 company's two products and the company's costs appear below:
MHs
Batches
Product Z
4,400
400
Product Q
5,600
1,600
10,000
2,000
Sales
$137,900
$173,300
Direct materials
$59,700
$43,400
Direct labor
$57,500
$96,000
Required - Show your workings, You have the option to upload the workings.
a. Calculate activity rates for each activity cost pool using activity-based costing.
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c. Determine the product margins for each product using activity-based costing.
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