Question

Arntson, Inc., manufactures and sells two products: Product R3 and Product N0. The annual production and sales of Product of R3 is 1,200 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-HoursProduct R3 1,200 4.0 4,800Product N0 200 2.0 400Total direct labor-hours 5,200The direct labor rate is $26.20 per DLH. The direct materials cost per unit is $228.00 for Product R3 and $300.00 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 ActivityActivity Cost Pools Activity Measures Overhead Cost Product R3 Product N0 TotalLabor-related DLHs $ 40,536 4,800 400 5,200Production orders orders 60,270 1,300 200 1,500Order size MHs 432,975 3,900 3,500 7,400$ 533,781The unit product cost of Product R3 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.)

Answer 1

Answer:

Unitary cost= $926.52

Explanation:

First, we need to calculate the activities rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Labor-related=  40,536 / 5,200= $7.8 per direct labor hour

Production orders= 60,270 / 1,500= $40.18 per order

Order size= 432,975 / 7,400= $58.51 per machine hour

Now, we can allocate costs to product R3:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Labor-related=  7.8*4,800= 37,440

Production orders= 40.18*1,300= 52,234

Order size= 58.51*3,900= 228,189

Total allocated costs= $654,863

Finally, the unitary cost:

Direct material= $300

Direct labor= 20.2*4= $80.8

Overhead= 654,863 / 1,200= $545.72

Unitary cost= $926.52