Question

Scrappy's Skateboards, Inc. is using (ABC) activity-based costing to compute product margins on their most popular skateboards: Standard Board (SB0) and Custom Board (SB5). Scrappy's has three basic activity cost pools which are "Assembly", "Supervising" and "Other". The overhead costs have been allocated to these three activity cost pools. These costs are listed below:

Assembly	$	4,940
Supervising	$	32,000
Other	$	11,000

Assembly 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 appear below:

	MHs (Assembly)	Batches (Supervising)
Product M0	12,350	800
Product M5	650	800
Total	13,000	1,600

Furthermore, the sales revenue and direct cost data (i.e. Direct Materials, Direct Labor) are combined with Assembly and Supervising costs to determine product margins.

	Product SB0		Product SB5
Sales (total)	$	80,400	$	92,900
Direct materials (total)	$	29,100	$	32,000
Direct labor (total)	$	28,400	$	42,300

Given this information, what is the product margin for their custom boards (SB5) under activity-based costing?

Multiple Choice

• $2,207

• $22,900

• $18,600

• $2,353

Answer 1

$2353 is correct answer

Working For refrence

Computation of Activity Rate
	Cost Pool	Activity Pool	Cost / Activity
Assembly	$4,940.00	13000	$0.38
Supervising	$32,000.00	1600	$20.00

Computation product margin - SB5
Particular	Amount
Sales	$92,900.00
Less:
Direct material	$32,000.00
Direct Labor	$42,300.00
Overhead
Assembly : ( 650X 0.38)	$247.00
Asupervising : ( 800*$20)	$16,000.00
Product Margin	$2,353.00