Farris Corporation's Activity-Based Costing System Has Three Activity Cost Pools-Machining $$\begin{array} { l r } \text { Machining } & \$ 15,200 \\\text { Batch Setup } & 44,800 \\\text { Other } & 16,000\end{array}$$

question 86

Essay

Farris Corporation's activity-based costing system has three activity cost pools-Machining, Batch Setup, and Other. The company's overhead costs have already been allocated to these cost pools as follows:
$$\begin{array} { l r } \text { Machining } & \$ 15,200 \\\text { Batch Setup } & 44,800 \\\text { Other } & 16,000\end{array}$$
Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Batch Setup cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. The following table shows the machine-hours and number of batches associated with each of the company's two products:
$$\begin{array} { l c r } & \text { MHs } & \text { Batehes } \\\text { Product Sea } & 2,000 & 8 0 0 \\\text { Product Air } & 8 , 0 0 0 & 200 \\\text { Total }& 10,000& 1,000 \\\end{array}$$
Additional data concerning the company's products appears below:
$$\begin{array} { l r r } & \text { Product Sea } & \text { Product Air } \\\text { Sales } &\$ 2 2 0 , 7 0 0 & \$ 1 6 5 , 5 0 0 \\\text { Direct materials } & 78,600 & 8 3 , 1 0 0 \\\text { Direct labor } & \$8 9 , 6 0 0 & 58,000\end{array}$$
Required:
a. Calculate activity rates for each activity cost pool using activity-based costing.
b. Determine the amount of overhead cost that would be assigned to each product using activity-based costing.
c. Determine the product margins for each product using activity-based costing.

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Definitions:

DNA Primase

Enzyme that begins the process of DNA replication by synthesizing a short RNA segment complementary to the DNA template strand; this RNA strand is subsequently degraded and replaced with DNA.

ATP

For metabolism within cells, adenosine triphosphate acts as the vital molecule carrying energy.

Meselson And Stahl

Two scientists who conducted an experiment in 1958 proving that DNA replication is semi-conservative, where each of the two strands of the DNA helix serves as a template for the new strand.

Telomeres

The protective end caps of chromosomes that consist of short, simple, non-coding DNA sequences that repeat many times.