Matthew Company manufactures two models of pens,a standard model and a deluxe model.Three activities have been identified in the production of the pens.The following information is available:
$\begin{array} { l }\text { Direct }&\text { Number of }&\text { Number of }&\text { Number of }\
\text { Product }&\text { Setups }& \text { Components } & \text { Labor Hours }\
\text { Standard } & 22 & 8 & 375 \
\text { Deluxe } & 28 & 12 & 225
\end{array}$

$$\begin{array} { l l c }
\text { Cost pool } & \text { Total costs } & \text { Cost Driver } \\hline
\text { Setup Costs } & \$ 15,000 & \text { Number of setups} \
\text { Assembly Costs }&\$36,000& \text { Number of components} \
\text { Labor Costs }&\$9,000& \text { Number of direct labor hours} \
\end{array}$$
If activity-based costing is used,the total costs assigned to the standard model are ________.
A) $22,500
B) $26,625
C) $33,375
D) $37,500

Question

Matthew Company manufactures two models of pens,a standard model and a deluxe model.Three activities have been identified in the production of the pens.The following information is available:
$\begin{array} { l  }\text { Direct }&\text { Number of }&\text { Number of }&\text { Number of }\
\text { Product }&\text { Setups }& \text { Components } & \text { Labor Hours }\
\text { Standard } & 22 & 8 & 375 \
\text { Deluxe } & 28 & 12 & 225
\end{array}$

$$\begin{array} { l l c } 
\text { Cost pool } & \text { Total costs } & \text { Cost Driver } \\hline
\text { Setup Costs } & \$ 15,000 & \text { Number of setups} \
\text { Assembly Costs }&\$36,000& \text { Number of components} \
\text { Labor Costs }&\$9,000& \text { Number of direct labor hours} \
\end{array}$$
If activity-based costing is used,the total costs assigned to the standard model are ________.
A) $22,500
B) $26,625
C) $33,375
D) $37,500

Quizplus · Accepted Answer

To calculate the total costs assigned to the standard model using activity-based costing, we allocate each cost pool based on the respective cost driver for each product.1. Setup Costs: Total = $15,000; Cost Driver = Number of setups.   - Standard model setups = 22; Deluxe model setups = 28; Total setups = 50.   - Cost per setup = $15,000 / 50 = $300.   - Standard model setup cost = 22 setups * $300/setup = $6,600.2. Assembly Costs: Total = $36,000; Cost Driver = Number of components.   - Standard model components = 8; Deluxe model components = 12; Total components = 20.   - Cost per component = $36,000 / 20 = $1,800.   - Standard model assembly cost = 8 components * $1,800/component = $14,400.3. Labor Costs: Total = $9,000; Cost Driver = Number of direct labor hours.   - Standard model labor hours = 375; Deluxe model labor hours = 225; Total labor hours = 600.   - Cost per labor hour = $9,000 / 600 = $15.   - Standard model labor cost = 375 hours * $15/hour = $5,625.Total costs assigned to the standard model = Setup cost + Assembly cost + Labor cost = $6,600 + $14,400 + $5,625 = $26,625.

Matthew Company Manufactures Two Models of Pens,a Standard Model and a Deluxe