220
204) Neas Corporation has an activity-based costing system with three activity cost
pools—Machining, Setting Up, and Other. The company’s overhead costs have already been
allocated to the cost pools and total $25,200 for the Machining cost pool, $17,200 for the Setting
Up cost pool, and $41,600 for the Other cost pool.
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 R8
6,600
200
Product N8
3,400
800
Total
10,000
1,000
Product R8
Product N8
Sales (total)
$
252,600
$
172,800
Direct materials (total)
$
125,100
$
96,900
Direct labor (total)
$
95,200
$
48,100
Required:
a. Calculate activity rates for each activity cost pool using activity-based costing.
b. Determine the amount of overhead cost that would be assigned to each product using
activity-based costing.
c. Determine the product margins for each product using activity-based costing.
222
205) Zwahlen Corporation 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
$
55,800
Setting Up
$
12,700
Other
$
28,500
MHs
Batches
Product D7
8,000
200
Product H0
12,000
800
Total
20,000
1,000
a. Calculate activity rates for each activity cost pool using activity-based costing.
b. Determine the amount of overhead cost that would be assigned to each product using
activity-based costing.
c. Determine the product margins for each product using activity-based costing.
224
206) Doles Corporation uses the following activity rates from its activity-based costing to assign
overhead costs to products.
Activity Cost Pools
Activity Rate
Setting up batches
$
98.54
per batch
Processing customer orders
$
42.00
per customer order
Assembling products
$
3.53
per assembly hour
Data concerning two products appear below:
Product
K52W
Product
X94T
Number of batches
55
73
Number of customer orders
9
17
Number of assembly hours
697
402
Required:
How much overhead cost would be assigned to each of the two products using the company’s
activity-based costing system?
226
207) Desjarlais Corporation uses the following activity rates from its activity-based costing to
assign overhead costs to products.
Activity Cost Pools
Activity Rate
Setting up batches
$
32.22
per batch
Assembling products
$
6.13
per assembly hour
Processing customer orders
$
72.75
per customer order
Data concerning two products appear below:
Product
S96U
Product
Q06F
Number of batches
78
24
Number of assembly hours
412
178
Number of customer orders
53
18
Required:
a. How much overhead cost would be assigned to Product S96U using the company’s
activity-based costing system? Show your work!
b. How much overhead cost would be assigned to Product Q06F using the company’s
activity-based costing system? Show your work!
208) Archie Corporation uses the following activity rates from its activity-based costing to assign
overhead costs to products.
Activity Cost Pools
Activity Rate
Setting up batches
$
16.68
per batch
Processing customer orders
$
98.60
per customer order
Assembling products
$
7.89
per assembly hour
Last year, Product X26X required 18 batches, 4 customer orders, and 103 assembly hours.
Required:
How much overhead cost would be assigned to Product X26X using the company’s activity-based
costing system? Show your work!
Setting up batches (18 batches × $16.68 per batch)
$
hour)
Total overhead cost
$
1,507.31
209) Mcnamee Corporation’s activity-based costing system has three activity cost
pools—Fabricating, Setting Up, and Other. Costs in the Fabricating 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.
The activity rate for Fabricating is $0.14 per MH; the activity rate for Setting Up is $3.30 per
batch. The following table shows the machine-hours and number of batches associated with each
of the company’s two products:
MHs
Batches
Product O0
2,800
200
Product O1
17,200
1,800
Total
20,000
2,000
Required:
Determine the amount of overhead cost that would be assigned to each product using
activity-based costing.
Activity Rate
Fabricating
per MH
MHs
Setting up
per batch
batches
Total
Activity
ABC Cost
Fabricating
per MH
MHs
Setting up
per batch
batches
Total
230
210) Orick Enterprises makes a variety of products that it sells to other businesses. The company’s
activity-based costing system has four activity cost pools for assigning costs to products and
customers. Details concerning that ABC system are listed below:
Activity Cost Pool
Activity Measure
Activity Rate
Supporting assembly
Direct labor-hours (DLHs)
$6.25
per DLH
Processing batches
Number of batches
$181.40
per batch
Processing orders
Number of orders
$54.00
per order
Serving customers
Number of customers
$2,574.00
per customer
The cost of serving customers, $2,574.00 per customer, is the cost of serving a customer for one
year. Peiffer Corporation buys only one of the company’s products. The details of last year’s
purchases of this product are listed below:
Number of units purchased
900
units
Number of batches
9
batches
Number of orders
4
orders
Direct labor-hour requirement
0.15
DLHs per unit
Selling price
$23.95
per unit
Direct materials cost
$7.00
per unit
Direct labor cost
$2.35
per unit
Required:
a. According to the ABC system, what is the cost of the “Supporting assembly” activity for Peiffer
Corporation for the year?
b. According to the ABC system, what is the cost of the “Processing batches” activity for Peiffer
Corporation for the year?
c. According to the ABC system, what is the cost of the “Processing orders” activity for Peiffer
Corporation for the year?
d. According to the ABC system, what is the cost of the “Servicing customers” activity for Peiffer
Corporation for the year?
e. What is the customer margin on sales to Peiffer Corporation for the year?
211) Mcinture Enterprises makes a variety of products that it sells to other businesses. The
company’s activity-based costing system has four activity cost pools for assigning costs to
products and customers. Details concerning that ABC system are listed below:
Activity Cost Pool
Activity Measure
Activity Rate
Supporting assembly
Direct labor-hours
(DLHs)
$4.20
per DLH
Processing batches
Number of batches
$123.35
per batch
Processing orders
Number of orders
$71.00
per order
Serving customers
Number of customers
$2,334.00
per customer
The cost of serving customers, $2,334.00 per customer, is the cost of serving a customer for one
year.
Schwerin Corporation buys only one of the company’s products which Mcinture Enterprises sells
for $28.40 per unit. Last year Schwerin Corporation ordered a total of 1,100 units of this product in
2 orders. To fill the orders, 6 batches were required. The direct materials cost is $8.40 per unit and
the direct labor cost is $1.80 per unit. Each unit requires 0.10 DLHs.
Required:
What is the customer margin on sales to Schwerin Corporation for the year?
Customer Margin-ABC Analysis
Sales (1,100 units × $28.40 per unit)
Costs:
Customer margin
233
212) Orozco Enterprises makes a variety of products that it sells to other businesses. The
company’s activity-based costing system has four activity cost pools for assigning costs to
products and customers. Details concerning that ABC system are listed below:
Activity Cost Pool
Activity Measure
Activity Rate
Supporting assembly
Direct labor-hours (DLHs)
$5.20
per DLH
Processing batches
Number of batches
$107.55
per batch
Processing orders
Number of orders
$88.75
per order
Serving customers
Number of customers
$1,793.00
per customer
The cost of serving customers, $1,793.00 per customer, is the cost of serving a customer for one
year. Ellyson Corporation buys only one of the company’s products. The details of last year’s
purchases of this product are listed below:
Number of units purchased
900
units
Number of batches
8
batches
Number of orders
2
orders
Direct labor-hour requirement
0.25
DLHs per unit
Selling price
$16.30
per unit
Direct materials cost
$6.60
per unit
Direct labor cost
$5.00
per unit
Required:
What is the customer margin on sales to Ellyson Corporation for the year?
235
213) Spigelmyer Enterprises makes a variety of products that it sells to other businesses. The
company’s activity-based costing system has four activity cost pools for assigning costs to
products and customers. Details concerning that ABC system are listed below:
Activity Cost Pool
Activity Measure
Activity Rate
Supporting assembly
Direct labor-hours (DLHs)
$5.50
per DLH
Processing batches
Number of batches
$176.30
per batch
Processing orders
Number of orders
$85.20
per order
Serving customers
Number of customers
$1,039.00
per customer
The cost of serving customers, $1,039.00 per customer, is the cost of serving a customer for one
year.
Oelschlaeger Corporation buys only one of the company’s products which Spigelmyer Enterprises
sells for $18.05 per unit. Last year Oelschlaeger Corporation ordered a total of 1,100 units of this
product in 2 orders. To fill the orders, 8 batches were required. The direct materials cost is $6.20
per unit and the direct labor cost is $5.70 per unit. Each unit requires 0.30 DLHs.
Required:
a. According to the ABC system, what is the cost of the “Supporting assembly” activity for
Oelschlaeger Corporation for the year?
b. According to the ABC system, what is the cost of the “Processing batches” activity for
Oelschlaeger Corporation for the year?
c. According to the ABC system, what is the cost of the “Processing orders” activity for
Oelschlaeger Corporation for the year?
d. According to the ABC system, what is the cost of the “Servicing customers” activity for
Oelschlaeger Corporation for the year?
e. What is the customer margin on sales to Oelschlaeger Corporation for the year?
