Question

Eliezrie, Inc., manufactures and sells two products: Product G8 and Product O0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:

	Expected Production	Direct Labor-Hours Per Unit	Total Direct Labor-Hours
Product G8	880	6.8	5,984
Product O0	480	3.8	1,824
Total direct labor-hours			7,808

The direct labor rate is $23.90 per DLH. The direct materials cost per unit for each product is given below:

	Direct Materials Cost per Unit
Product G8	$131.10
Product O0	$131.50

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

		Estimated		Expected Activity
Activity Cost Pools	Activity Measures	Overhead Cost		Product G8	Product O0	Total
Labor-related	DLHs	$	64,555	5,984	1,824	7,808
Machine setups	setups		63,390	1,300	690	1,990
Order size	MHs		374,508	5,700	6,900	12,600
		$	502,453

Which of the following statements concerning the unit product cost of Product G8 is true?

Answer 1

Calculate unit product cost

Overhead	Product G8
Labor-related (64555/7808*5984)	49475
Machine setups (63390/1990*1300)	41411
Order size (374508/12600*5700)	169420
Total Overhead	260306
Unit	880
Overhead cost per unit	295.80
Direct material	131.10
Direct labor (5984/880)	6.80
Unit product cost	433.70