Question

Arntson, Inc., manufactures and sells two products: Product R3 and Product N0. The annual production and sales of Product of R3 is 1,100 units and of Product N0 is 200 units. 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 R3 1,100 8.0 8,800 Product N0 200 4.0 800 Total direct labor-hours 9,600 The direct labor rate is $24.10 per DLH. The direct materials cost per unit is $285.00 for Product R3 and $235.00 for Product N0. The company is considering adopting 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 R3 Product N0 Total Labor-related DLHs $ 41,536 8,800 800 9,600 Production orders orders 56,010 1,200 200 1,400 Order size MHs 433,975 3,500 2,700 6,200 $ 531,521 The unit product cost of Product R3 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) rev: 03_25_2018_QC_CS-119201 Multiple Choice $778.81 per unit $1,063.81 per unit $586.01 per unit $301.01 per unit

Answer 1

Answer:

Arntson, Inc.

The unit product cost of Product R3 under activity-based costing is closest to:

$778.81 per unit

Explanation:

a) Data and Calculations:

Annual production and sales:

                                        Product R3           Product N0

Units                                      1,100                   200

Direct Labor-Hours              1,100                   200

Per Unit  Total                         8.0                    4.0

Direct Labor-Hours            8,800                   800

Total direct labor-hours                                            9,600

Direct labor rate is         $24.10 per DLH.

Direct materials cost      $285.00               $235.00

Estimated Expected   Activity Cost   Activity Measures   Overhead Cost

Activity                             Pools                                                                                          

                                     Overhead Cost   Product R3    Product N0     Total

Labor-related DLHs          $ 41,536          8,800                800         9,600

Production orders orders   56,010           1,200                200          1,400

Order size MHs                433,975           3,500            2,700         6,200

Total overhead costs     $ 531,521

Activity rates:                                                      Product R3      Product N0

Labor-related DLHs  $4.33  ($41,536/9,600)        $38,104         $3,464

Production orders    $40.00 ($56,010/1,400)         48,000           8,000

Order size MHs        $70.00 ($433,975/6,200)   245,000       189,000

Total allocated overhead costs                             $331,104   $200,464

                                        Product R3           Product N0

Units                                      1,100                   200

Direct materials cost      $285.00               $235.00 per unit

Total materials costs =  $313,500                 $47,000

Total direct labor costs   212,080                    19,280

Total overhead costs       331,104                 200,464

Total production costs $856,684              $266,744

Unit cost =                       $778.80               $1,333.72