Klumper Corporation is a diversified manufacturer of industrial goods. The company's activity-based costing system contains thefollowing six activity cost pools and activity rates:Activity Cost PoolSupporting direct laborMachine processingMachine setups$ 40 per setupProduction orders$ 150 per orderShipments$ 120 per shipmentProduct sustaining$ 800 per productActivity data have been supplied for the following two products:Number of units produced per yearDirect labor-hoursMachine-hoursMachine setupsProduction ordersShipmentsProduct sustainingActivity Cost PoolSupporting direct laborMachine processingMachine setupsProduction ordersShipmentsProduct sustainingTotal overhead cost$Activity Rate$10 per direct labor-hour$ 3 per machine-hourK4250Total Expected ActivityK425M672,000Required:How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system?$2009752,60077142M67504002222

Answered: Klumper Corporation is a diversified…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Klumper Corporation is a diversified manufacturer of industrial goods. The company's activity-based costing system contains the
following six activity cost pools and activity rates:
Activity Cost Pool
Supporting direct labor
Machine processing
Machine setups
$ 40 per setup
Production orders
$ 150 per order
Shipments
$ 120 per shipment
Product sustaining
$ 800 per product
Activity data have been supplied for the following two products:
Number of units produced per year
Direct labor-hours
Machine-hours
Machine setups
Production orders
Shipments
Product sustaining
Activity Cost Pool
Supporting direct labor
Machine processing
Machine setups
Production orders
Shipments
Product sustaining
Total overhead cost
$
Activity Rate
$10 per direct labor-hour
$ 3 per machine-hour
K425
0
Total Expected Activity
K425
M67
2,000
Required:
How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system?
$
200
975
2,600
7
7
14
2
M67
50
40
0
2
2
2
2

Expert Solution

Step 1: Introduce to activity rate and Overhead Assigned

Activity rate is the rate used to allocate manufacturing overhead to cost object under activity based costing system. It is calculated by dividing total estimated activity overhead cost by estimated activity usage. Overhead assigned is calculated by multiplying activity rate by actual activity usage.

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