1.) What is the ABC unit product cost for the Deluxe model? 2.) What is the ABC

Question

1.) What is the ABC unit product cost for the Deluxe model?

2.) What is the ABC unit product cost for the Tourist model?

Deluxe Tourist Annual sales in units 1,000 9,000 Direct materials per unit $30 $30 Direct labor-hours per unit 1 1 Direct labor rate $17 per DLH Estimated Overhead Expected Activity Activities and Activity Measures Cost Deluxe Tourist Total Labor related (direct labor-hours) $35,000 1,000 9,000 10,000 Machine steups (setups) 120,000 40 60 100 Production Order (orders) 70,000 35 15 50 General Factory (machine-hours) 150,000 10,000 10,000 20,000 $375,000

Explanation / Answer

Answer:

Allocation of overhead cost for Deluxe:

Allocation of overhead cost for Tourist:

Therefore product cost:

Activity Overhead Cost Activity rate Overhead allocated Labour related 35000 1000/10000=10% 3500 Machine setups 120000 40/100=40% 48000 Production order 70000 35/50=70% 49000 General factory 150000 10000/20000=50% 75000 Total 175500

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