Reference no: EM132529977

Musich Corporation has an activity-based costing system with three activity cost pools--Machining, Setting Up, 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             $8,000               $45,200              $22,400             $75,600

Indirect labor                          2,400                  2,200                    3,400              8,000

Total                                       $10,400             $47,400                   $25,800           $83,600

Costs in the Machining 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 appear below:

                 MHs       Batches

Product Z3          5,300400

Product T1        5,5001,000

Total                  10,8001,400

                                         Product Z3                       Product T1

Sales (total)                 $216,800                    $248,500

Direct materials (total)    $80,500                     $96,200

Direct labor (total)              $108,600              $101,700

Required:

Question a. Calculate activity rates for each activity cost pool using activity-based costing.

Question b. Determine the amount of overhead cost that would be assigned to each product using activity-based costing.

Question c. Determine the product margins for each product using activity-based costing.