Scheuer Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment expense and indirect labor--to three activity cost pools--Processing, Supervising, and Other--based on resource consumption. Data to perform these allocations appear below: Distribution of Resource Consumption Across Activity Cost Pools:
In the second stage, 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 for the company's two products follow:
Activity:
Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.
Sales and Direct Cost Data:
What is the overhead cost assigned to Product Q1 under activity-based costing?
A) $14,170
B) $450
C) $31,000
D) $13,720

Question

Scheuer Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment expense and indirect labor--to three activity cost pools--Processing, Supervising, and Other--based on resource consumption. Data to perform these allocations appear below:  Distribution of Resource Consumption Across Activity Cost Pools:
 In the second stage, 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 for the company's two products follow:
Activity:
 Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.
Sales and Direct Cost Data:
 What is the overhead cost assigned to Product Q1 under activity-based costing?
A) $14,170 
B) $450 
C) $31,000 
D) $13,720

Quizplus · Accepted Answer

Assign overhead costs to products:
Processing: $9,000 ÷ 20,000 MHs = $0.45 per MH
Supervising: $39,200 ÷ 2,000 batches = $19.60 per batch
Overhead cost for Product Q1:
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Scheuer Corporation Uses Activity-Based Costing to Compute Product Margins