Problem
Groleau Corporation has an activity-based costing system with three activity cost pools--Processing, Setting Up, and Other. The company's overhead costs, which consist of factory utilities and indirect labor, are allocated to the cost pools in proportion to the activity cost pools' consumption of resources. Costs in the Processing cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. Data concerning the two products and the company's costs and activity-based costing system appear below: Factory utilities (total) $ 34,100 Indirect labor (total) $ 10,900 Distribution of Resource Consumption Across Activity Cost Pools Processing Setting Up Other Factory utilities 0.40 0.20 0.40 Indirect labor 0.30 0.30 0.40 MHs Batches Product S8 3,300 1,300 Product F1 7,100 800 Total 10,400 2,100 Product S8 Product F1 Sales (total) $ 66,200 $ 97,800 Direct materials (total) $ 22,900 $ 34,800 Direct labor (total) $ 29,600 $ 43,700
Task
1. Assign overhead costs to activity cost pools using activity-based costing.
2. Calculate activity rates for each activity cost pool using activity-based costing.
3. Determine the amount of overhead cost that would be assigned to each product using activity-based costing.
4. Determine the product margins for each product using activity-based costing.