Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Processing, Supervising, and Other. The costs in those activity cost pools appear below: Processing $ 6,300 Supervising $ 22,320 Other $ 11,400 Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below: MHs (Processing) Batches (Supervising) Product M0 14,250 450 Product M5 750 450 Total 15,000 900 Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins. Product M0 Product M5 Sales (total) $ 82,600 $ 94,900 Direct materials (total) $ 29,500 $ 32,400 Direct labor (total) $ 28,800 $ 42,700 What is the product margin for Product M5 under activity-based costing?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Processing, Supervising, and Other. The costs in those activity cost pools appear below:
| Processing | $ 6,300 |
|---|---|
| Supervising | $ 22,320 |
| Other | $ 11,400 |
| MHs (Processing) | Batches (Supervising) | |
|---|---|---|
| Product M0 | 14,250 | 450 |
| Product M5 | 750 | 450 |
| Total | 15,000 | 900 |
Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.
| Product M0 | Product M5 | |
|---|---|---|
| Sales (total) | $ 82,600 | $ 94,900 |
| Direct materials (total) | $ 29,500 | $ 32,400 |
| Direct labor (total) | $ 28,800 | $ 42,700 |
What is the product margin for Product M5 under activity-based costing?
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