Problem 7 138 Pressler Corporation s…
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Pressler Corporation’s activity based costing system has three activity cost pools Machining, Setting Up, and Other. The company’s overhead costs, which consist of equipment depreciation and indirect labor, are allocated to the cost pools in proportion to the activity cost pools’ consumption of resources. |
| Equipment depreciation (total) | $ | 35,600 |
| Indirect labor (total) | $ | 7,350 |
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| Distribution of Resources Consumption Across Activity Cost Pools | |||
| Machining | Setting up | Other | |
| Equipment depreciation | 0.20 | 0.50 | 0.30 |
| Indirect labor | 0.30 | 0.30 | 0.40 |
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Costs in the Machining 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. |
| MHs | Batches | |
| Product S4 | 13,000 | 1,200 |
| Product V6 | 4,200 | 1,600 |
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| Total | 17,200 | 2,800 |
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Additional data concerning the company’s products appears below:
| Product S4 | Product V6 | |||
| Sales (total) | $ | 93,800 | $ | 72,400 |
| Direct materials (total) | $ | 31,800 | $ | 27,700 |
| Direct labor (total) | $ | 37,200 | $ | 26,900 |
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| Required: | |
| a. |
Assign overhead costs to activity cost pools using activity based costing. (Omit the “$” sign in your response.) |
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Activity Cost Pools |
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| Machining | Setting up | Other | Total | |
| Equipment depreciation | $ | $ | $ | $ |
| Indirect labor | ||||
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| Total | $ | $ | $ | $ |
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| b. |
Calculate activity rates for each activity cost pool using activity based costing. (Round your answersto 2 decimal places. Omit the “$” sign in your response.) |
| Activity Rate | ||
| Machining | $ | per MH |
| Setting up | $ | per batch |
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| c. |
Determine the amount of overhead cost that would be assigned to each product using activity based costing. (Omit the “$” sign in your response.) |
| Product S4 | Product V6 | |
| Machining | $ | $ |
| Setting up | ||
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| Total | $ | $ |
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| d. |
Determine the product margins for each product using activity based costing. (Omit the “$” sign in your response.) |
| Product Margin | |
| Product S4 | $ |
| Product V6 | $ |
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