Reference no: EM132522062

Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Processing, Supervising, and Other. The costs in those activity cost pools appear below:

Processing$6,250

Supervising$36,040

Other$12,200

Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:

                          MHs(Processing)               Batches (Supervising)

Product M01                      1,800                850

Product M5                          700                  850

Total                               12,500                1,700

• Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.

Product M0Product

M5Sales (total) $87,100             $98,900

Direct materials (total)$30,300   $33,200

Direct labor (total)$29,600        $43,500

Question 1: What is the product margin for Product M5 under activity-based costing?

Multiple Choice

Option 1: $27,200

Option 2: $22,200

Option 3: $3,830

Option 4: $3,280