Excel Manufacturing Has an Activity-Based Costing System with Three Activity

question 135

Essay

Excel Manufacturing has an activity-based costing system with three activity cost pools-Machining, Batch Setup, and Other. The company's overhead costs have already been allocated to the cost pools and total $28,000 for the Machining cost pool, $13,800 for the Batch Setup cost pool, and $27,200 for the Other cost pool.
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. Data concerning the company's two products and the company's costs appear below:
$$\begin{array} { l c r } & \text { MHs } & \text { Batches } \\\text { Product A } & 5,200 & 500 \\\text { Product B } & 14,800 & 500 \\\text { Total } & 20,000 & 1,000 \\\end{array}$$
$$\begin{array} { l c c } & \text { Product A } & \text { Product B } \\\text { Sales } & \$ 124,300 & \$ 166,000 \\\text { Direct materials } & \$ 53,100 & \$ 71,500 \\\text { Direct labor } & \$ 54,000 & \$ 56,600\end{array}$$
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:

Phenol

An aromatic compound characterized by a hydroxyl group attached to a benzene ring, used in the manufacture of plastics and pharmaceuticals.

Aromatic R-group

A designation for the side-chain attachment to an aromatic ring, where "R" signifies a variable group or side chain in chemical structures.

Standard Amino Acids

The 20 amino acids that are encoded by the standard genetic code, integral to biological processes as the building blocks of proteins.

Side Chain

The part of a molecule that is attached to a core structure and varies among molecules of the same class, influencing the properties of the molecule.