Question

Paparo Corporation has provided the following data from its activity-based costing system: Activity Cost Pool Total Cost Total Activity Assembly $ 775,100 46,000 machine-hours Processing orders $ 57,375 1,500 orders Inspection $ 108,772 1,420 inspection-hours Data concerning the company's product Q79Y appear below: Annual unit production and sales 450 Annual machine-hours 1,120 Annual number of orders 110 Annual inspection hours 50 Direct materials cost $ 41.00 per unit Direct labor cost $ 41.29 per unit According to the activity-based costing system, the average cost of product Q79Y is closest to:

Answer 1

Answer:

$142.10

Explanation:

The computation of average cost of product Q79Y is shown below:-

Activity cost  Total cost   Total activity     Activity Rate

pool

Assembly    $775,100           46,000           $16.85

Processing

orders        $57,375              1,500              $38.25

Inspection   $108,772            1,420              $76.6

Average cost

Direct Material Cost                             $41.00

Direct labor Cost                                  $41.29

Total Direct Cost                                 $37,031

( Material Cost + Labor Cost ) × Number of Units

Add :Assembly Cost                           $18,872

(1,120 Hours × $16.85)

Add :Processing Order Cost              $4,208

(110 Orders × $ 38.25)

Add :Inspection Cost                          $3,830

(50 Hours × $ 76.6)

Total Cost                                            $63,941

Average Cost = Total Cost ÷ Annual Units

= $63,941 ÷ 450

= $142.10