Serva, Inc., manufactures and sells two products: Product R4 and Product N4. Dat

Question

Serva, Inc., manufactures and sells two products: Product R4 and Product N4. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:

The direct labor rate is $24.70 per DLH. The direct materials cost per unit for each product is given below:

The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

The unit product cost of Product R4 under activity-based costing is closest to:

Question options:

$566.96 per unit

$601.16 per unit

$429.43 per unit

$535.31 per unit

Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product R4 800 6.0 4,800 Product N4 300 3.0     900 Total direct labor-hours 5,700

Explanation / Answer

Per unit cost = Direct material _+direct labor +overhead cost

                   = 202.1+ (24.7*6) + (148006/800)

                  = 202.1 + 148.2 + 185.01

                 = $ 535.31 per unit

correct option is "D"

Labor related 86811*4800/5700 73104 Machine setup 29000*400/1000 11600 General factory 122520*3100/6000 63302 Overhead allocated under ABC costing 148006

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