Roshannon 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: 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: Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.
-What is the overhead cost assigned to Product P3 under activity-based costing?
A)$30,000
B)$5,916
C)$5,640
D)$11,556

Question

Roshannon 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: 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: Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins. 
-What is the overhead cost assigned to Product P3 under activity-based costing?
A)$30,000 
B)$5,916 
C)$5,640 
D)$11,556

Quizplus · Accepted Answer

Assign overhead costs to products:
Processing: $13,600 F1F1F1S1F1F1F10 20,000 MHs = $0.68 per MH
Supervising: $18,800 F1F1F1S1F1F1F10 2,000 batches = $9.40 per batch
Overhead cost for Product P3:
 11eaa48f_7b92_37f1_9e4a_db912f632a5e_TB2485_00

Roshannon Corporation Uses Activity-Based Costing to Compute Product Margins