A B Per unit of direct material cost $0.61 $1.67 Per Unit of Direct Labor Cost $

Question

A B Per unit of direct material cost $0.61 $1.67 Per Unit of Direct Labor Cost $2.44 $0.83 Sales Volume in Units 82,000 48,000 Direct labor Hours per Unit 3.05 1.04 Activity Cost Pool Overhead Driver A B Total Purchasing $53,000 Purchase Orders 170 330 500 Receiving 42,000 Pounds of material 70,000 98,000 168,000 Assembling 180,000 Direct Labor Hours 250,000 50,000 300,000 Finishing 325,000 Units 82,000 48,000 130,000 $600,000 a.Calculate unit cost using one cost pool and direct labor hours as the driver. b. Calculate unit cost using activity based costing a.Check figures unit cost A$ 9.15 B4.58 b. Check figures unit cost A$ 7.81 B6.86

Explanation / Answer

a) As per Direct Labour hour Method

Product A:

Direct Material cost = 0.61*82000 =$ 50020

Direct Labour cost = 2.44*82000 =$ 200080

Overhead Cost = Total overhead * direct labour hour of A/ Total Direct Labour Hour = 600000*250000/300000 = 500000

Total Cost = $7,50,100

Cost per unit = 750100/82000 =$9.15

Product B:

Direct Material cost = 1.67*48000 =$ 80160

Direct Labour cost = 0.83*48000 =$ 39840

Overhead Cost = Total overhead * direct labour hour of A/ Total Direct Labour Hour = 600000*50000/300000 = 100000

Total Cost = $220000

Cost per unit = 220000/48000 =$4.58

a) As per ABC

Product A:

Direct Material cost = 0.61*82000 =$ 50020

Direct Labour cost = 2.44*82000 =$ 200080

Overhead Cost:

Purchasing cost =53000*170/500 =$18020

Recieving Cost = 42000*70000/168000=$17500

Assembling Cost= 180000*250000/300000=$150000

Finishing Cost =325000*82000/130000 =$205000

Total Ovehead Cost = $390520

Total Cost = $640620

Cost per unit = 640620/82000 =$7.81

Product B:

Direct Material cost = 1.67*48000 =$ 80160

Direct Labour cost = 0.83*48000 =$ 39840

Overhead Cost:

Purchasing cost =53000*330/500 =$34980

Recieving Cost = 42000*98000/168000=$24500

Assembling Cost= 180000*50000/300000=$30000

Finishing Cost =325000*48000/130000 =$120000

Total Ovehead Cost = $209480

Total Cost = $329480

Cost per unit = 329480/48000 =$6.86

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