Medical Scooters Corporation (MSC) has an activity-based costing system with thr
ID: 2542499 • Letter: M
Question
Medical Scooters Corporation (MSC) has an activity-based costing system with three activity cost pools: Machining, Setting Up, and Other. The company's overhead costs, which consist of equipment depreciation and indirect labor, have been allocated to the cost pools already and are provided in the table below. MSC produces two models of medical scooters: Z9 and Q2.
Activity Cost Pools
Machining
Setting Up
Other
Total
Equipment depreciation
$27,200 .
$6,800
$34,000
$68,000
Indirect labor
2,500
1,000
1,500.
5,000
Total
$29,700
$7,800
$35,500.
$73,00
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. Data concerning the two products appear below:
MHs
Batches
Model Z9
4,400.
400
Model Q2
5,600
1,600
Total activity
10,000
2,000
Sales and direct cost data appear below:
Model Z9
Model Q2
Sales
$137,900
$173,300
Direct materials
$59,700.
$43,400
Direct labor
$57,500
$96,000
What is the product margin for Model Z9 under activity-based costing?
Activity Cost Pools
Explanation / Answer
Calculate product margin for Model Z9 :
so answer is b) $6072
Sales 137900 Direct material (59700) Direct labour (57500) Machining cost (29700/10000*4400) (13068) Setting up cost (7800/2000*400) (1560) Product margin 6072