Question

11:01 PM Thu Nov 14 .. @ 21%D Test on chapters 7 & 8 Testbank Exercise 3 Stockin Company produces Tablets and Books. Total overhead costs traditionally have been allocated on the basis of direct labor hours. After implementing activity-based costing, managers determined the following cost pools and cost drivers. They also decided that general costs should no longer be allocated to products. Activity Pool Binding Printing Product design General Total overhead costs Department Costs Cost driver $236,731.25 Number of units 842,058.00 Machine hours 187,488.00 Change orders 694,522.75 None $1,960,800.00 Other information is as follows: Units Direct materials cost per unit Direct labor cost per unit Direct labor hours Machine hours Change orders Tablets 77,300 $4.00 $5.00 30,400 147,600 2,016 Books 19,325 $12.00 $10.00 15,200 110,700 4,032 Your answer is correct. Determine the unit product cost for Tablets using the traditional costing system. (Round answer to 2 decimal places, e.g. 1.64.) Unit product cost for Tables SL 25.91 Click if you would like to Show Work for this question: Open Show Work SHOW SOLUTION Attempts: 1 of 1 used (b) Determine the unit product cost for Tablets using the activity-based costing system. (Round answer to 2 decimal places, e.g. 1.64.) Unit product cost for Tablets $ Click if you would like to Show Work for this question: Open Show Work

Answer 1

Solution b:

Computation of Activity rates
Activity cost pool	Overhead costs	Total Cost drivers	Activity Rate
Binding	$2,36,731.25	96625	$2.45	Per unit
Printing	$8,42,058.00	258300	$3.26	Per machine hour
Product Design	$1,87,488.00	6048	$31.00	per Change order
General	$6,94,522.75	None

Computation of Overhead assigned to Tablets and Overhead per unit
Activity	Activity Rate	Cost Driver used	Overhead Allocated
Binding	$2.45	77300	$1,89,385
Printing	$3.26	147600	$4,81,176
Product Design	$31.00	2016	$62,496
Total Cost assigned			$7,33,057
/ No. of Units			77300
Overhead per unit of Tablet			$9.48

Unit product cost for Tablets = $4.00 + $5.00 + $9.48 = $18.48