Vargus Corporation Has an Activity-Based Costing System with Three Activity

question 118

Essay

Vargus Corporation has an activity-based costing system with three activity cost pools-Processing, Batch Setup, and Other. The company's overhead costs consist of equipment depreciation and indirect labor and are allocated to the cost pools in proportion to the activity cost pools' consumption of resources. Equipment depreciation totals $72,000 and indirect labor totals $8,000. Data concerning the distribution of resource consumption across activity cost pools appear below:
$$\begin{array} { | l | c | c | c | } \hline & \text { Pracessing } & \text { Batch Setup } & \text { Other } \\\hline \text { Equipment depreciation } & 0.20 & 0.40 & 0.40 \\\hline \text { Indirect labor } & 0.20 & 0.30 & 0.50 \\\hline\end{array}$$
Required:
Assign overhead costs to activity cost pools using activity-based costing.

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Definitions:

Marginal Revenue

The additional revenue that a company generates from selling one more unit of a good or service.

Moustache Wax

A grooming product used to style and hold the moustache in place.

Marginal Cost

The additional cost incurred by producing one more unit of a product or service.

Natural Monopoly

A market condition where a single firm can provide a product or service at a lower cost than any potential competitor, often due to economies of scale.