Ballweg Corporation has an activity-based costing system with three activity cost pools-Machining, Order Filling, and Other. In the first stage allocations, costs in the two overhead accounts, equipment depreciation and supervisory expense, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow: 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 for the company's two products follow: Finally, the costs of Machining and Order Filling are combined with the following sales and direct cost data to determine product margins.
-What is the product margin for Product T2 under activity-based costing?
A)$1,821
B)$871
C)$8,700
D)$16,200

Question

Ballweg Corporation has an activity-based costing system with three activity cost pools-Machining, Order Filling, and Other. In the first stage allocations, costs in the two overhead accounts, equipment depreciation and supervisory expense, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow:  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 for the company's two products follow: Finally, the costs of Machining and Order Filling are combined with the following sales and direct cost data to determine product margins. 
-What is the product margin for Product T2 under activity-based costing?
A)$1,821 
B)$871 
C)$8,700 
D)$16,200

Quizplus · Accepted Answer

Activity-based costing allocates overhead costs more accurately to products based on the activities that generate costs. The product margin for Product T2 is calculated by subtracting the allocated overhead and direct costs from the sales revenue, resulting in $871.

Ballweg Corporation Has an Activity-Based Costing System with Three Activity