Bartow Corporation Uses an Activity Based Costing System to Assign

question 127

Multiple Choice

Bartow Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs--equipment expense and indirect labor--are allocated to the 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:
What is the overhead cost assigned to Product H3 under activity-based costing?

• A) $6,930
• B) $13,496
• C) $18,500
• D) $6,566

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Definitions:

Average Variable Cost

The variable cost per unit of output, calculated by dividing total variable costs by the quantity of output produced.

Perfectly Competitive

Describes a market structure where numerous small firms compete against each other, and no single entity has market power to set the price of a homogeneous product.

Market Price

The price at which a good or service is offered in the marketplace, determined by supply and demand forces.

Marginal Cost

The increase in total cost that arises from producing an additional unit of output, reflecting the cost of producing one more unit.