Doede 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$39,000?Supervisory expense$9200?Distribution of Resource Consumption Across Activity Cost Pools: Activity Cost Pools MachiningOrder FillingOtherEquipment depreciation0.60?0.30?0.10?Supervisory expense0.60?0.20?0.20?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 W15940?186?Product M015,300?988?Total21,240?1174??Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.Sales and Direct Cost Data: Product W1Product M0Sales (total)$70,000?$62,300?Direct materials (total)$30,800?$15,200?Direct labor (total)$16,100?$31,800?What is the product margin for Product W1 under activity-based costing?
A. $13,657
B. $12,877
C. $17,437
D. $3437
Answer: B
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