Question

Plaid Manufacturing Co. produces two products: G1 and M1. The company uses an activity based costing system. The following are the activities, budgeted total cost and cost drivers per activity for the year 20x9:

Activity	Budgeted Cost	Cost Base	Cost Base Volume
Assembly	$891922	# of DL hours	34289
Inspection	$657733	# of units	23317
Shipping	$322225	# of batches	182

Plaid Manufacturing has budgeted to produce 3,000 units of G1. G1 is manufactured in batches of 72 units and requires 16966 hours of direct labour.

What is the overhead cost per unit for product G1?

Select one:

a. $217.81

b. $623.96

c. $199.90

d. $172.37

Answer 1

Correct answer-------------(c) $199.90

Working

Cost assigned to G1
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Assembly	$           26.01	16,966.00	$      4,41,317.88
Inspection	$           28.21	3,000.00	$         84,624.91
Shipping	$     1,770.47	41.67	$         73,769.46
Total Overheads assigned			$      5,99,712.24
Production			3,000.00
Overhead cost per unit			$ 199.90

.

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Assembly	Number of DL hours	$     8,91,922.00	34289	$             26.01	Per DL hour
Inspection	Number of units	$     6,57,733.00	23317	$             28.21	Per unit
Shipping	Number of batchs	$     3,22,225.00	182	$       1,770.47	Per batch