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Brisky Corporation uses activity based costing to compute product margins. In the first stage, the activity based costing system allocates two overhead accounts equipment depreciation and supervisory expense to three activity cost pools Machining, Order Filling, and Other based on resource consumption. Data to perform these allocations appear below: |
| Overhead costs: | |
| Equipment depreciation | $28,000 |
| Supervisory expense | $14,100 |
| Distribution of Resource Consumption Across Activity Cost Pools: | |||
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Activity Cost Pools |
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| Machining | Order Filling | Other | |
| Equipment depreciation | 0.50 | 0.30 | 0.20 |
| Supervisory expense | 0.50 | 0.20 | 0.30 |
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In the second stage, Machining costs are assigned to products using machine hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. |
| Activity: | ||
| MHs (Machining) | Orders (Order Filling) | |
| Product I3 | 5,750 | 177 |
| Product U8 | 21,600 | 960 |
| Total |
27,350 |
1,137 |
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Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins. |
| Sales and Direct Cost Data: | ||
| Product I3 | Product U8 | |
| Sales (total) | $63,800 | $65,200 |
| Direct materials (total) | $31,500 | $16,100 |
| Direct labor (total) | $19,300 | $31,300 |
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What is the product margin for Product I3 under activity based costing? (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.) |
| $7,606 | |
| $11,386 | |
| $ 2,614 | |
| $6,826 |