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28 November, 06:31

According to the activity-based costing system, the product margin for product Athena is: A. $19,418.40 B. $6,224.60 C. $5,975.60 D. $5,515.40 E. None of the above

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  1. 28 November, 08:32
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    Incomplete question:

    The missing part of the question is here below:

    Jennings Corporation has provided the following data from its activity based costing system.

    Activity Cost Pool Total Cost Total Activity

    Assembly $613,250 55,000 machine-hours

    Processing Orders $46,170 1500 orders

    Inspection $146,110 1,900 inspection-hours

    Data concerning one of the company's products, product Athena appear below:

    Selling price $120.80 per unit

    Direct material cost $48.14 per unit

    Direct labour cost $11.62 per unit

    Annual production & sales 360 units

    Annual machine-hours 1040

    Annual orders 60 times

    Annual inspection hours 30 hours

    Answer : $6,224.60 (B)

    $ $

    Sales ($120.80*360) 43,488

    Prime cost:

    Direct Materials (48.14*360) 17,330.4

    Direct labours (11.62*360) 4183.2 21,513.6

    Contribution 21,974.4

    Overhead Costs:

    Assembly (11.15*1040) 11,596

    Processing Order (30.78*60) 1846.8

    Inspection costs (76.9*30) 2307 (15,749.8)

    Margin 6224.6

    Margin/unit = 6224.6/360 ⇒ $17.29

    Explanation:

    Workings

    Overhead Absorption Rate (OAR) = Total cost pool/Total Activity

    -Assembly cost = 613,250/55,000 = $ 11.15/hr

    -Processing Orders = 46,170/1500 = $30.78/order

    -Inspection = 146,110/1900 = $76.9/hr
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