Activity-based costing system


Problem:

Larner 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

Activity Rates

Supporting direct labor..................................

$7.00 per direct labor-hour

Machine processing.......................................

$3.00 per machine-hour

Machine setups............................................

$40.00 per setup

Production orders..........................................

$160.00 per order

Shipments....................................................

$120.00 per shipment

Product sustaining....................

$800 per product

Activity data have been supplied for the following products:

                                                                                                 Total Expected Activity

                                   J78              W52

Direct labor-hours.........................................

1,000               40

Machine hours..................................

3,200               30

Machine setups.......................................

       5                1

Production orders..........................................

       5                1

Shipments....................................................

     10                1

Product sustaining....................

       5                1

Required:

Determine the total overhead cost that would be assigned to each of the products listed above in the activity-based costing system.

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Accounting Basics: Activity-based costing system
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