Scheuer Corporation Uses Activity-Based Costing to Compute Product Margins

question 302

Multiple Choice

Scheuer Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment expense and indirect labor--to three activity cost pools--Processing, Supervising, 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, Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow:Activity:
Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.Sales and Direct Cost Data:
What is the overhead cost assigned to Product Q1 under activity-based costing?

• A) $14,170
• B) $450
• C) $31,000
• D) $13,720

---

Definitions:

Market Price

The present cost at which a product or service is available for purchase or sale in a specific market.

Optimal Short-Run Output

The level of production that maximizes profit or minimizes loss in the short term.

Market Price

The current price at which an asset or service can be bought or sold, determined by the supply and demand dynamics in the market.

Downward-Sloping Demand Curves

A graphical representation indicating that as the price of a good or service decreases, the quantity demanded increases, and vice versa.