Doede Corporation Uses Activity-Based Costing to Compute Product Margins

question 25

Multiple Choice

Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment depreciation and supervisory expense--to three activity cost pools--Machining, Order Filling, 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, 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:
Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.Sales and Direct Cost Data:
What is the product margin for Product W1 under activity-based costing?

• A) $7,996
• B) $23,356
• C) −$12,800
• D) $35,200

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Definitions:

Budget Line

A graphical representation showing all possible combinations of two goods that a consumer can afford with a given income and prices.

Vertical Intercept

The point where a line crosses the vertical axis on a graph, indicating the value of y when x is zero.

Milkshakes

A creamy beverage made from milk, ice cream, and often flavorings or sweeteners like syrup or fruit.

Budget Line

A graphical representation showing all possible combinations of two goods that can be purchased with a given budget at set prices.