Flemming Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Machining, Order Filling, and Other. The costs in those activity cost pools appear below: 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 data appear below:
Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.
What is the overhead cost assigned to Product U6 under activity-based costing?
A) $36,500
B) $20,064
C) $33,804
D) $13,740

Question

Flemming Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Machining, Order Filling, and Other. The costs in those activity cost pools appear below:  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 data appear below:
 Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.
 What is the overhead cost assigned to Product U6 under activity-based costing?
A) $36,500 
B) $20,064 
C) $33,804 
D) $13,740

Quizplus · Accepted Answer

Assign overhead costs to products:
Total MHs = 9,600 MHs + 400 MHs = 10,000 MHs
Machining: $20,900 ÷ 10,000 MHs = $2.09 per MH
Total orders = 600 orders + 400 orders = 1,000 orders
Order Filling: $22,900 ÷ 1,000 orders = $22.90 per order
Overhead cost for Product U6:
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Flemming Corporation Uses Activity-Based Costing to Compute Product Margins