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120.
The Sparkle Cleaning Company provides housecleaning services to its clients. The
company uses an activity–based costing system for its overhead costs. The company has
provided the following data from its activity-based costing system.
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Total Cost
Total Activity
$101,574
16,200
hours
32,724
1,800
jobs
5,472
320
clients
100,000
Not applicable
$239,770
support
support
client
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121.
Cooke Company manufactures two products, Product F and Product G. The company
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expects to produce and sell 1,400 units of Product F and 1,800 units of Product G during
the current year. The company uses activity-based costing to compute unit product costs
for external reports. Below are current year data for the company’s three activity cost
pools.
Total Activity
Activity
Cost
Pool
Total
Cost
Product F
Product G
Total
Machine
setups
$10,800
80
setups
100
setups
180
setups
Purchase
orders
$77,520
510
orders
1,010
orders
1,520
orders
General
factory
$75,920
2,240
hours
3,600
hours
5,840
hours
Machine
per
Purchase
1,520
orders
$51.00
per
General
factory
5,840
hours
$13.00
per
hour
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122.
Barnard Corporation has provided the following data from its activity-based costing
accounting system:
Activity Cost
Total
Total Activity
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Pools
Cost
Designing
products
$806,715
6,895
product design
hours
Batch Setup
$23,660
910
batch set-ups
Assembling
products
$42,240
3,520
assembly
hours
Required:
Compute the activity rates for each of the three cost pools. Show your work!
hour
batch
set-up
123.
Data concerning three of Parkeman Corporation’s activity cost pools appear below:
Activity Cost
Pools
Total
Cost
Total Activity
Assembling
products
$49,830
4,530
assembly
hours
Designing
$557,220
3,012
product design
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products
hours
Batch Setup
$38,180
830
batch set-ups
124.
Safety Corporation uses the following activity rates from its activity-based costing to
assign overhead costs to products.
Activity Cost Pools
Activity Rate
Batch Setup
$62.52
per batch
Processing customer
orders
$19.58
per customer
order
Assembling products
$8.71
per assembly
hour
Data concerning two products appear below:
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Product
C
Product
E
Number of batches
66
53
Number of customer
orders
46
31
Number of assembly hours
419
162
Batch
Setup
per
batch
hour
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125.
Work Horse Corporation uses the following activity rates from its activity-based costing to
assign overhead costs to products.
Activity Cost
Pools
Activity Rate
Batch Setup
$83.75
per batch
Assembling
products
$2.88
per assembly
hour
Processing
customer
orders
$50.41
per customer
order
Data concerning two products appear below:
Product J
Product S
Number of batches
34
41
Number of assembly hours
105
824
Number of customer orders
17
38
Assembling products (105 assembly
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126.
Maxim Corporation uses the following activity rates from its activity-based costing to
assign overhead costs to products.
Activity Cost Pools
Activity Rate
Batch Setup
$74.76
per batch
Processing customer
orders
$55.40
per customer
order
Assembling products
$1.36
per assembly
hour
Last year, Product P involved 33 batches, 1 customer orders, and 368 assembly hours.
Required:
How much overhead cost would be assigned to Product P using the company’s activity–
based costing system? Show your work!
Assembling products (368 assembly
Total overhead cost
127.
Sarno Corporation has an activity-based costing system with three activity cost pools–
Processing, Batch Setup, and Other. Costs in the Processing cost pool are assigned to
products based on machine-hours (MHs) and costs in the Batch Setup 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:
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Activity Cost Pools
Processing
$3,000
Batch Setup
$9,800
Other
$9,200
MHs
Batches
Product #1
5,800
700
Product #2
4,200
300
Total
10,000
1,000
Product #1
Product #2
Sales (total)
$45,300
$48,400
Direct materials (total)
$19,600
$16,900
Direct labor (total)
$15,900
$24,200
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128.
Market Corporation has an activity-based costing system with three activity cost pools–
Processing, Batch Setup, and Other. The company’s overhead costs, which consist of
factory utilities and indirect labor, are allocated to the cost pools in proportion to the
activity cost pools’ consumption of resources. Data concerning the company’s costs and
activity-based costing system appear below:
Factory utilities (total)
$39,000
Indirect labor (total)
$3,000
Distribution of Resource Consumption Across
Activity Cost Pools
Processing
Batch
Setup
Other
Factory
utilities
0.10
0.60
0.30
Indirect labor
0.30
0.10
0.60
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129.
Vargus Corporation has an activity-based costing system with three activity cost pools–
Processing, Batch Setup, and Other. The company’s overhead costs consist of equipment
depreciation and indirect labor and are allocated to the cost pools in proportion to the
activity cost pools’ consumption of resources. Equipment depreciation totals $72,000 and
indirect labor totals $8,000. Data concerning the distribution of resource consumption
across activity cost pools appear below:
Processing
Batch
Setup
Other
Equipment
depreciation
0.20
0.40
0.40
Indirect labor
0.20
0.30
0.50
Processing
Indirect
labor
2,400
130.
Yang Corporation has an activity-based costing system with three activity cost pools–
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Machining, Batch Setup, and Other. The company’s overhead costs, which consist of
equipment depreciation and indirect labor, have been allocated to the cost pools already
and are provided in the table below.
Activity Cost Pools
Machining
Setting
Up
Other
Total
Equipment
depreciation
$27,200
$6,800
$34,000
$68,000
Indirect
labor
2,500
1,000
1,500
5,000
Total
$29,700
$7,800
$35,500
$73,000
Costs in the Machining cost pool are assigned to products based on machine-hours
(MHs) and costs in the Batch Setup 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 Z
4,400
400
Product Q
5,600
1,600
Total
10,000
2,000
Product Z
Product Q
Sales (total)
$137,900
$173,300
Direct materials (total)
$59,700
$43,400
Direct labor (total)
$57,500
$96,000
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.
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