Question

Dobles Corporation has provided the following data from its activity-based costing system: The Assembly Cost Pool has a total costs of $228,060 (with 18,000 machine-hours), the Processing Cost Pool has a total costs of $34,068 (with 1,200 orders) and the Inspection Cost Pool has a total costs of $125,560 (with 1,720 inspection-hours). The company makes 420 units of product D28K a year, requiring a total of 460 machine-hours, 80 orders, and 10 inspection-hours per year. The product's direct materials cost is $48.96 per unit and its direct labor cost is $25.36 per unit. According to the activity-based costing system, the unit product cost of product D28K is closest to:
A.
$95.34 per unit
B.
$93.60 per unit
C.
$74.32 per unit
D.
$89.93 per unit

Answer 1

Answer:

A.  

$95.34 per unit

Explanation:

activity cost pool     total cost(a)       total activity(b)        activity rate

assembly                  $228060         180000 hours             $12.67

processing oders       $34068             1200 orders             $28.39

inspection                   $125560           1720 hours                 $73.00

Cost per activity is obtained by dividing total cost for each activity pool with its respective total activity. Cost per activity is helpful to identify the total cost allocated to each activity.

particulars               expected activity         per activity rate    total cost

assembly                  460 hours                     $12.67                  $5828.20

processing orders    80 orders                      $28.39                 $2271.20

inspection                   10 hours                       $73.00                  $730.00

manufacturing overhead                                                            $8829.40

Manufacturing overhead is the other costs that are neither direct material cost and nor direct labor cost. Here we add the total cost incurred in each cost pool to arrive at manufacturing overhead of $8,829.40. The manufacturing overhead incurred is allocated to each cost pool as per the activity and per activity rate.

manufacturing overhead per unit = manufacturing overhead/total units produced

= $8829.40/420

= $21.02

product cost per unit = direct material per unit + direct labor per unit + manufacturing overhead cost per unit

                                    = $48.96 + $25.36 + $21.02

                                    = $95.34

Therefore, the unit product cost of product D28K is closest to $95.34