Question

Alpha Technology produces two products: a high end laptop under the label Excellent Laptops and an inexpensive desktop under the label Outstanding Computers. The two products use two overhead activities, with the following costs: Setting up equipment $3,000 Machining $15,000 The controller has collected the expected annual prime costs for each product, the machine hours, the 」setup hours, and the expected production. Excellent Laptops Outstanding Computers Direct Labor Direct Materials Expected Production in Units Machine Hours Setup Hours Calculate the overhead cost per unit for each of Outstanding Computer's computer using overhead $25,000 $20,000 3,000 850 80 $10,000 $5,000 3,000 2,000 75 rates based on machine hours and setup hours. (Note: Round answer to two decimal places.) a.$3.99 per unit b.$5.75 per unit c.$4.88 per unit d.$6.10 per unit

Answer 1

Answer:

a.$3.99 per unit

Explanation:

The computation of the overhead cost per unit is shown below:

Allocated setting up equipment

= $3,000 × (75 ÷ 75 + 80)

= $1,451.61

Allocated machining

= $15,000 × (2,000 ÷ 2,000 + 850)

= $10,526.31

Total overhead is

= $10,526.31 + $1,451.61

= $11,979.92

Now the overhead cost per unit is

= $11,979.92 ÷ 3,000

= $3.99 per unit