Flemming Corporation Uses Activity-Based Costing to Compute Product Margins

question 111

Multiple Choice

Flemming 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 product margin for Product U6 under activity-based costing?

• A) $45,100
• B) $11,296
• C) $25,036
• D) $8,600

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Definitions:

Retained Earnings

The portion of net income that is retained by a company rather than distributed to its shareholders as dividends.

Coupon Rate

The interest rate on a bond which the issuer pays to the bondholders, generally fixed and paid at specific intervals.

Yield to Maturity

The total anticipated return on a bond if held to its maturity date, including all interest payments and capital gains or losses.

Required Rate of Return

The minimum return an investor expects to achieve by investing in a particular asset, taking into account the risk level of the investment.