Question

DB Gamma Technology produces two products: a high-end laptop under the label Gamma Laptops and an inexpensive desktop under the label Beta Computers. The company uses the following two activity pools to accumulate overhead costs: $2,945 Setting Up Equipment Machining $14,991 The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production. Laptops Computers Direct materials $25,000 $10,000 Direct labor $20,000 $5,000 Expected production (in 3,355 2,389 units) Machine hours 850 2,000 Setup hours 80 75 If the controller allocates costs in the Setting Up Equipment pool based on setup hours and allocates costs in the Machining pool base on machine hours, then what will be the total overhead cost per unit for computers? O $3.99 per unit O $4.88 per unit O $5.00 per unit O $6.10 per unit

Answer 1

Answer

· Correct Answer = Option #3: $ 5.00 per unit

	Total Cost	Total activity driver	Activity rate	Activity driver for 'Computer'	Total Overheads allocated
Setting Ip cost	$2,945	155	$19.00	75	$1,425
Machining Cost	$14,991	2850	$5.26	2000	$10,520
				Total Overheads alloccated	$11,945
				TOTAL UNITS	2389
				Overhead cost per unit	$5.00