ede 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 $ 91,000 Supervisory expense $ 12,300 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.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two
| Overhead costs: | |
|---|---|
| Equipment depreciation | $ 91,000 |
| Supervisory expense | $ 12,300 |
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 W1 | 6,050 | 198 |
| Product M0 | 21,800 | 999 |
| Total | 27,850 | 1,197 |
Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.
Sales and Direct Cost Data:
| Product W1 | Product M0 | |
|---|---|---|
| Sales (total) | $ 73,000 | $ 69,800 |
| Direct materials (total) | $ 30,800 | $ 18,500 |
| Direct labor (total) | $ 16,600 | $ 30,600 |
What is the product margin for Product W1 under activity-based costing?
Note: Round your intermediate calculations to 2 decimal places.
Multiple Choice
$7,966
$2,254
$7,186
$11,746
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