4. Dobles Corporation has provided the following data from its activity-based co

Question

4. Dobles Corporation has provided the following data from its activity-based costing systenm Activity Cost Pools Assembly Processing orders Inspection Estimated Overhead Cost Expected Activity $228,06018,000machine-hours $34,0681,200|orders S125,5601,720inspection-hours The company makes 420 units of product D28K a year, requiring a total of 460 machine-hours, 80 orders, and 10 inspection-hours per year. The product's direct materials cost is $48.96 per unit and its direct labor cost is $25.36 per unit. According to the activity-based costing system, the unit product cost of product D28K is closest to: A. $95.34 per unit B. $93.60 per unit C. $69.98 per unit D. S91.98 per unit E. $21.02 per unit

Explanation / Answer

Activity cost per activity=Expected overhead cost/Expected Acitvity

Hence activity cost per:

Machine-hours=(228060/18000)=$12.67

Processing orders=(34068/1200)=$28.39

Inspection=(125560/1720)=$73

Hence total overhead for product=($12.67*460)+($28.39*80)+($73*10)

=$8829.40

Add:total direct material cost=(48.96*420)=$20563.20

Add:total direct labor cost=(25.36*420)=$10651.20

Total=$40043.8

Hence unit product cost=(40043.8/420)

which is equal to

=$95.34 per unit(Approx).

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