Drewniak Corporation has provided the following data from its activity-based cos

Question

Drewniak Corporation has provided the following data from its activity-based costing system:

Activity Cost Pool Total Cost Total Activity
Assembly............... $942,480 66,000 machine-hours
Processing orders.... $85,050 1,800 orders
Inspection............. $126,854 1,820 inspection-hours

The company makes 430 units of product O37W a year, requiring a total of 690 machine-hours, 40 orders, and 10 inspection-hours per year. The product's direct materials cost is $35.72 per unit and its direct labor cost is $29.46 per unit.
According to the activity-based costing system, the average cost of product O37W is closest to:

a. $94.11 per unit
b. $89.72 per unit
c. $65.18 per unit
d. $92.49 per unit

Explanation / Answer

The company makes 430 units of product O37W a year, requiring a total of 690 machine-hours, 40 orders, and 10 inspection-hours per year. The product's direct materials cost is $35.72 per unit and its direct labor cost is $29.46 per unit. Average cost = total cost/output Hence, d. $92.49 per unit is the answer.

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