Solution

Activity Cost Pool K425 M67

Supporting Direct Labor $9,400 $240

Machine Processing $9,600 $80
Machine Setups $675 $45
Production Orders $2,400 $160
Shipments $3,600 $120
Product sustaining $775 $755
Total overhead Cost $26,450 $1,420

K425
Activity Cost Pool K425 Activity Rate Activity ABC Cost

Supporting direct labor $6 per direct labor-hour 80 direct labor-hours $480

Machine processing $4 per machine-hour 100 machine-hours $400
Machine setups $50 per setup 1 setups $50
Production orders $90 per order 1 orders $90
Shipments $14 per shipment 1 shipments $14
Product Sustaining $840 per product 1 product $840
Total Overhead Cost $1,874

M67
Activity Cost Pool M67 Activity Rate Activity ABC Cost

Supporting direct labor $6 per direct labor-hour 500 direct labor-hours $3000
Machine processing $4 per machine-hour 1,500 machine-hours $6000
Machine setups $50 per setup 4 setups $200
Production orders $90 per order 4 order $360
Shipments $14 per shipment 10 shipments $140
Product Sustaining $840 per product 1 product $840
Total Overhead Cost $10,540

No. of unit produced per year cost 200*1874=$3, 74,800 2000*10,540=$21, 08,000

Total overhead cost K425 $3, 74,800

M67 $21, 08,000

$2,
=$2, 14,14, 54,800
54,800