Answer:
Product margin per unit= $10.19
Explanation:
Giving the following information:
Activity Cost Pool Total Cost Total Activity
Assembly $ 613,250 55,000 machine-hours
Processing orders $ 46,170 1,500 orders
Inspection $ 146,110 1,900 inspection-hours
First, we need to calculate the estimated overhead rate for each activity cost pool:
To calculate the estimated manufacturing overhead rate we need to use the following formula:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Assembly= 613,250/55,000= $11.15 per machine hour
Processing= 46,170/1,500= $30.78 per order
Inspection= 146,110/1,900= $76.9 per inspection hour
We will calculate the total cost of production and then the unitary cost to determine the product margin:
Total cost= direct material + direct labor + allocated overhead
Selling price per unit $ 113.70
Direct materials cost per unit $ 48.14
Direct labor cost per unit $ 11.62
Annual unit production and sales 360
Annual machine-hours 1,040
Annual orders 60
Annual inspection-hours 30
Total cost= 48.14*360 + 11.62*360 + (1,040*11.15 + 60*30.78 + 30*76.9)= 37,263.4
Unitary cost= 37,263.4/360= 103.51
Product margin= selling price - unitary cost= 113.70 - 103.51= $10.19
