Question

Salvatori, Inc., manufactures and sells two products: Product A4 and Product Q5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product A4 550 6.5 3,575 Product Q5 850 3.5 2,975 Total direct labor-hours 6,550 The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product A4 Product Q5 Total Labor-related DLHs $ 160,558 3,575 2,975 6,550 Machine setups setups 8,050 550 450 1,000 Order size MHs 497,027 3,700 4,000 7,700 $ 665,635 The overhead applied to each unit of Product A4 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) rev: 03_25_2018_QC_CS-119201

Answer 1

Answer:

Cost per unit of overhead = $330,891.46/550 = $601.62

Explanation:

Total units produced of A4 = 550

Activity                    Total cost          Activity rate of A4          Total Activity

Labor Related         $160,558             3,575 DLH                       6,550 DLH

Machine Setup        $8,050                 550 Setups                     1,000 Setups

Order Size               $497,027              3,700 MHs                      7,700 MHs

Total                         $665,635

Overhead applied to Product A4

Labor = $\frac{160,558}{6,550} \times 3,575 = 87,632.80$

Machine Setup = $\frac{8,050}{1,000} \times 550 = 4,427.5$

Order Size = $\frac{497,027}{7,700} \times 3,700 = 238,831.16$

Total Cost for 550 units = $87,632.80 + $4,427.5 + $238,831.16 = $330,891.46

Cost per unit of overhead = $330,891.46/550 = $601.62