Evaluation of overhead cost assigned to a product

Assignment Help Accounting Basics

Reference no: EM13824306

Problem-

Brisky Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts-equipment depreciation and supervisory expense-to three activity cost pools-Machining, Order Filling, and Other-based on resource consumption. Data to perform these allocations appear below:

Overhead costs:
Equipment depreciation	$35,000
Supervisory expense	$15,800
Distribution of Resource Consumption Across Activity Cost Pools:
		Activity Cost Pools
		Machining	Order Filling	Other
Equipment depreciation		0.60	0.30	0.10
Supervisory expense		0.60	0.20	0.20

In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products.

Activity:	MHs (Machining)	Orders (Order Filling)
Product I3	5,760	112
Product U8	20,800	999
Total	26,560	1,111

Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.

Sales and Direct Cost Data:	Product I3	Product U8
Sales (total)	$70,400	$61,400
Direct materials (total)	$36,200	$22,100
Direct labor (total)	$17,200	$34,400

What is the overhead cost assigned to Product I3 under activity-based costing?

a. $30,480.00

b. $8,002.00

c. $6,624.00

d. $1,378.00

Additional Requirement-

The problem belongs to Basic Accounting and it discusses about calculation of overhead cost assigned to a product under activity-based costing.

Reference no: EM13824306

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