1. CAM Company manufactures two products, Product A and Product B. The company e
ID: 2375503 • Letter: 1
Question
1. CAM Company manufactures two products, Product A and Product B. The company expects to produce and sell 1,000 units of Product A and 2,000 units of Product B during the current year. The company uses activity-based costing to compute unit product costs for external reports. Data relating to the company's three activity cost pools are given below for the current year:
Estimated
Expected Activity
Activities
Overhead Costs
Product A
Product B
Total
Machine setups
$12,500
50
75
125
Purchase orders
$4,950
200
250
450
General factory
15,600
600
700
1,300
Using the activity-based costing approach, determine the overhead cost per unit for Product A.
Estimated
Expected Activity
Activities
Overhead Costs
Product A
Product B
Total
Machine setups
$12,500
50
75
125
Purchase orders
$4,950
200
250
450
General factory
15,600
600
700
1,300
Explanation / Answer
overhead of machine setup for A = (50/125) * 12500 = 5000
overhead of purchase orders for A = (200/450) * 4950 = 2200
pverhead of general factory of A = (600/1300) * 15600 = 7200
total overhead of A = 14400
overhead cost per unit of A = 14400/1000 = 14.4
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