Question 14 (of 22)> | Save & Exit | | Submit Time remaining: 1:32:16 14 Shed In

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Question 14 (of 22)> | Save & Exit | | Submit Time remaining: 1:32:16 14 Shed Industries produces two products. The products' identified costs are as follows: Product A Product B $20,000 29,000 $25,000 Direct materials Direct labor 11,000 The company's overhead coss of $160,000 are allocated based on direct labor cost. Assume 9,000 units of product A and 10,000 units of Product B are produced. What is the cost per unit for product B? (Do not round intermediate calculations. Round your answer to 2 decimal places.) O $16.50 O $4.90 O $16.00 O None of these answers is correct.

Explanation / Answer

STEP 1: Calculation of Overhead recovery rate Overhead cost is based on the direct labour Cost Direct Labour Cost = Labour Cost for Product A + Labour Cost for product B Direct Labour Cost = $ 11,000 + $ 29,000 = $ 40,000 Recovery Rate = Overhead Cost / Direct Labour Cost Recovery Rate = $ 160,000 / $ 40,000 Recovery Rate = $ 4.00 Step 2: CALCULATION OF THE COST OF THE PRODUCT B Material Cost $                     20,000 Direct Labour $                     29,000 Overhead Cost ( $ 29,000 X $ 4.00) $           1,16,000.00 Total Cost $                 1,65,000 Number of units Produced =                         10,000 Units Cost per Unit = Total Cost / Number of Units Produced Cost per Unit = $ 165,000 / 10,000 Units Cost per Unit = $ 16.50 Per unit Answer = Option 1 = $ 16.50

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