Question

Feliciano Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, I63E and E76I, about which it has provided the following data: I63E E76I Direct materials per unit $ 21.70 $ 65.10 Direct labor per unit $ 19.50 $ 58.50 Direct labor-hours per unit 0.80 2.40 Annual production (units) 90,000 30,000
The company's estimated total manufacturing overhead for the year is $2,063,250 and the company's estimated total direct labor-hours for the year is 45,000.
The company is considering using a form of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:
Activities and Activity Measures Estimated
Overhead Cost
Assembling products (DLHs) $ 720,000
Preparing batches (batches) 263,250
Product support (product variations) 1,080,000
Total $ 2,063,250
Expected Activity
I63E E76I Total
DLHs 24,000 21,000 45,000
Batches 1,080 675 1,755
Product variations 2,115 1,485 3,600
The manufacturing overhead that would be applied to a unit of product E76I under the activity-based costing system is closest to:________.

Answer 1

Answer:

Unitary cost= $30.91

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

Assembling products= 720,000/45,000= $16 per DLH

Preparing batches= 263,250/1,755= $150 per batch

Product support= 1,080,000/3,600= $330 per product variation

Now, we allocate costs to Product E76l:

Assembling products= 16*21,000= $336,000

Preparing batches= 150*675= $101,250

Product support= 330*1,485= $490,050

Total= $927,300

Finally, the unitary cost:

Unitary cost= 927,300 / 30,000

Unitary cost= $30.91