Question

Activity Cost Pools Estimated Overhead Cost Expected Activity Assembly $ 515,520 52,500 machine-hours Processing orders $ 62,763 1,950 orders Inspection $ 86,089 1,960 inspection-hours Data concerning the company's product L19B appear below: Annual unit production and sales 600 Annual machine-hours 1,160 Annual number of orders 240 Annual inspection hours 190 Direct materials cost $ 54.74 per unit Direct labor cost $ 27.45 per unit According to the activity-based costing system, the unit product cost of product L19B is closest to: (Round your intermediate calculations to 2 decimal places.)

Answer 1

Answer:

$127.96

Explanation:

The computation of unit product cost of product L19B is shown below:-

Particulars               Total pool cost   Total activity   Activity rate

Assembly                   $515,520             52,500          9,82

Processing orders     $62,763                1,950             32.19

Inspections                 $86,089                1,960             43.92

For determining the activity rate we simply divide the total pool cost by total activity for assembly and in the same manner for others too.

Particulars                 Activity rate    Activity         Overhead allocated

Assembly                     9,82              1,160              11,391.2

Processing orders      32.19              240                7,725.6

Inspections                  43.92              190                8,344.8

Total                                                                           27,462

For determining the overhead allocated we simply multiply the activity rate with activity.

Overhead cost per unit = 27,462 ÷ 600

= $45.77

So,

Unit product cost = Overhead cost per unit + Direct material + Direct labor

= $45.77 + $54.74 + $27.45

= $127.96