Reference no: EM132710223

Hardwood Limited 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:

Processing $12,200
Setting up $25,100
Other $17,700

                      MHs           Batches

Product Red 2,400       700
Product Blue 17,600      300
Total             20,000   1,000

                                Product Red        Product Blue

Sales (total)             $135,700           $98,000
Direct materials (total) $61,700            $31,000
Direct labour (total)        $52,200        $45,800

Problem 1: Determine the product margins for each product using activity-based costing. Show workings.