Valdez Company produces several lines of laundry hampers. The factory is highly

Question

Valdez Company produces several lines of laundry hampers. The factory is highly automated and uses an activity-based costing system to allocate overhead costs to its various products. During the upcoming period the company expects to produce 80,000 units. The costs and cost drivers associated with four activity cost pools are given below: ACTIVITIES: UNIT BATCH PRODUCT FACILITY LEVEL LEVEL LEVEL LEVEL Cost $38,000 $8,800 $15,800 $36,800 Cost Driver 10,000 labor hrs 280 set ups % of use 80,000 units Production of 48,000 units of its popular foldable hamper required 4,200 labor hours, 158 setups, and consumed one-third of the product sustaining activities. What amount of unit-level costs will be allocated to the product?

Explanation / Answer

Amount of unit-level costs will be allocated to the product is calculated as under:

ACTIVITIES: UNIT BATCH PRODUCT FACILITY LEVEL LEVEL LEVEL LEVEL   Cost 38,000 8,800 15,800 36,800   Cost Driver 10,000 labor hrs 280 set ups % of use 80,000 units Per unit cost 3.8 31.43 0.46 Total units 48,000 48,000 48,000 48,000 48,000 Cost driver 4,200 labour hours 158 setups 1/3rd 48,000 Total Cost 15960 4966 5267 22080 48272.4 Total units 48000 48000 48000 48000 48000 Unit level cost 0.33 0.10 0.11 0.46 1.01

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