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

Question

Valpar 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 72,000 units. The costs and cost drivers associated with four activity cost pools are given below:

Production of 20,000 units of its popular foldable hamper required 3,000 labor hours, 75 setups, and consumed one-third of the product sustaining activities. What amount of unit-level costs will be allocated to the product?

Multiple Choice

$5,000

$2,500

$7,500

$6,000

ACTIVITIES: UNIT LEVEL BATCH LEVEL PRODUCT LEVEL FACILITY LEVEL cost $ 30,000 $ 8,000 $ 15,000 $ 36,000 Cost driver 12,000 labor hrs 200 setups % of use 72,000 units

Explanation / Answer

Calculate unit level cost :

so answer is c) 7500

Unit level cost (30000/12000*3000) 7500

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