Question

Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Processing, Supervising, and Other. The costs in those activity cost pools appear below:

Processing	$	4,625
Supervising	$	31,500
Other	$	10,900

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 appear below:

	MHs (Processing)	Batches (Supervising)
Product M0	12,000	750
Product M5	500	750
Total	12,500	1,500

Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.

	Product M0		Product M5
Sales (total)	$	79,600	$	92,400
Direct materials (total)	$	29,000	$	31,900
Direct labor (total)	$	28,300	$	42,200

What is the overhead cost assigned to Product M5 under activity-based costing?

(A) $24,655

(B) $16,555

(C) $41,000

(D) $15,935

Answer 1

Calculation of per activity rate
Activity cost pool	Estimated Overhead	Expected Activity	Rate per activity
a	b	c	d=b/c
Processing	$                             4,625	12500 hours	$                                     0.37
Supervising	$                           31,500	1500 Batches	$                                   21.00
Calculation of total manufacturing overhead to be assigned to the product M5
Activity cost pool	Number Of Activities	Rate per activity	Overhead Assigned
a	b	c	d=b*c
Processing	500	$                            0.37	$                                 185.00
Supervising	750	$                          21.00	$                           15,750.00
			$                                          -
			$                                          -
Total			$                           15,935.00
Total Overhead Assigned to The Product M=$15935
Correct Option:D