Stroth 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 C4 under activity-based costing?
A)$6, 542
B)$5, 292
C)$1, 250
D)$10, 500

Question

Stroth 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 C4 under activity-based costing?
A)$6, 542 
B)$5, 292 
C)$1, 250 
D)$10, 500

Quizplus · Accepted Answer

Assign overhead costs to products:
Total MHs = 9, 800 MHs + 200 MHs = 10, 000 MHs
Machining: $5, 400 ÷ 10, 000 MHs = $0.54 per MH
Total orders = 500 orders + 500 orders = 1, 000 orders
Order Filling: $2, 500 ÷ 1, 000 orders = $2.50 per order
Overhead cost for Product C4:
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Stroth Corporation Uses Activity-Based Costing to Compute Product Margins