Question

: A jewelry supply house incurred $300,000 in factory overhead cost, of which $50,000 was identified as the cost of sanders for polishing tool bits. It also incurred rent of $75,000 for the building in which the tool bits and other products were manufactured. 20% of the building space is used to manufacture tool bits. It paid $100,000 in sales commission for tool bits. Under activity-based costing, the jeweler will identify ________ as product cost for tool bits.

Answer 1

Answer:

$165,000

Explanation:

The computation of the product cost is shown below:

= Sales commission paid for tool bits + cost of sanders for polishing tool bits + rent of the building × given percentage

= $100,000 + $50,000 + $75,000 × 20%

= $100,000 + $50,000 + $15,000

= $165,000

As we know that the product cost is a mix of Direct materials used, Direct labor, and the manufacturing overhead cost