ProPats is a company that manufactures three souvenir products and has the follo

ID: 2353627 • Letter: P

Question

ProPats is a company that manufactures three souvenir products and has the following direct costs for producing three 1,000 unit batches, one for each product:

Hats Shirts Banners
Direct Materials $5,000 $5,000 $5,000
Direct Labor $1,000 $1,000 $1,000

Activity Cost Pool Est. Annual cost Est. Activity Level Activity Rate

Supervision $600 $3,000 direct labor $0.20 per dir labor
Inspection $400 10 inspections $40 per inspection
Depreciation $2,000 2,000 machine hours $1 per machine hour

Hats Shirts Banners
Direct Labor $1,000 $1,000 $1,000
No. of Inspections 4 4 2
Machine hours 1000 500 500

Calculate the Unit Cost of a banner.

Explanation / Answer

Banners

Direct Materials

5000

Direct Labor

1000

Supervision

200

($0.20 per direct labor dollar times 1000 direct labor dollars)

Inspections

$40 per inspection times 2 inspections

Depreciation

500

$1 per machine hour times 500 machine hours

Total

6780

Unit cost

6.78

Total cost of 6780 dividend by number of units, 1000