Kenrick Corporation Uses Activity-Based Costing to Compute Product Margins

question 124

Multiple Choice

Kenrick 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: 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: Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins. The activity rate for the Processing activity cost pool under activity-based costing is closest to:

• A)$2.00 per MH
• B)$0.18 per MH
• C)$0.24 per MH
• D)$1.00 per MH

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