Scheuer Corporation Uses Activity-Based Costing to Compute Product Margins

question 112

Multiple Choice

Scheuer 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: Distribution of Resource Consumption Across Activity Cost Pools:
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:
Activity:
Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.
Sales and Direct Cost Data:
What is the product margin for Product Q1 under activity-based costing?

• A) -$13,200
• B) $3,630
• C) $17,800
• D) $17,350

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Definitions:

Supporting Documents

Paperwork or electronic files that provide evidence or back up for transactions recorded in an accounting system.

Electronic Funds Transfers

Digital transfers of money from one bank account to another either within the same financial institution or across different institutions.

Cash Collections

The process of receiving and managing payments from customers for goods or services provided.

Change Fund

A change fund is a set amount of money, composed of various denominations, used to make change for transactions in business operations.