Klumper Corporation is a diversified manufacturer of industrial goods. The company’s activity-based costing system contains the following six activity cost pools and activity rates: Activity Cost Pool Activity Rates Supporting direct labor $ 9 per direct labor-hour Machine processing $ 3 per machine-hour Machine setups $ 40 per setup Production orders $ 170 per order Shipments $ 115 per shipment Product sustaining $ 750 per product Activity data have been supplied for the following two products: Total Expected Activity K425 M67 Number of units produced per year 200 2,000 Direct labor-hours 1,050 40 Machine-hours 2,800 30 Machine setups 17 2 Production orders 17 2 Shipments 34 2 Product sustaining 2 2 Required: How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system?

Instructions are below.

Explanation:

Giving the following information:

K425 M67

Number of units produced per year 200 2,000

Direct labor-hours 1,050 40

Machine-hours 2,800 30

Machine setups 17 2

Production orders 17 2

Shipments 34 2

Product sustaining 2 2

To calculate the total overhead allocated to each product, we need to use the following formula:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

K425:

Supporting direct labor= 9*1,050= 9,450

Machine processing= 3*2,800= 8,400

Machine setups= 40*17= 680

Production orders= 170*17= 2,890

Shipments= 115*34= 3,910

Product sustaining= 750*2= 1,500

Total overhead= $26,830

M67:

Supporting direct labor= 9*40= 360

Machine processing= 3*30= 90

Machine setups= 40*2= 80

Production orders= 170*2= 340

Shipments= 115*2= 230

Product sustaining= 750*2= 1,500

Total overhead= $2,600

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