Stroth Corporation Uses Activity-Based Costing to Compute Product Margins

question 71

Multiple Choice

Stroth Corporation uses activity-based costing to compute product margins.Overhead costs have already been allocated to the company's three activity cost pools-Machining, Order Filling, and Other.The costs in those activity cost pools appear below: 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 data appear below: Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins. The activity rate for Machining under activity-based costing is closest to:

• A)$0.54 per MH
• B)$4.00 per MH
• C)$0.34 per MH
• D)$2.10 per MH

Understand the concept of manufacturing overhead costs and how they are calculated.

Calculate average fixed manufacturing cost per unit produced.

Understand the concepts of variable costs and how they impact pricing and profit.

Calculate the total amount of fixed manufacturing cost incurred.

---

Definitions:

Expenses

Costs incurred in the process of earning revenue, including operational, administrative, and marketing costs.

Total Stockholders' Equity

The total value of a corporation's equity owned by shareholders, synonymous with stockholders' equity but emphasizes the aggregation.

Retained Earnings

The part of the net earnings kept by the company instead of being paid out to shareholders as dividends.

Common Stock

A type of equity security that represents ownership in a corporation, granting holders the right to vote at shareholder meetings and receive dividends.