Question

Coporation is a diversified manufacturer of industrial goods. The company's activiy-based costing system contains the following six activity cost pools and activity rates Activity Rates s 8.00 per direct labor-hour S 10.00 per machine-hour S 40.00 per setup S 90.00 per order S 190.00 per shipment s 13.00 per direct labor-hour Activity Cost Pool Labor-related Machine-related Machine setups Production orders Shipments General factory Cosl and activity data have been supplied for the following products B52 S 7.00 S 4700 Direct materials cost per un Diroct labor cost per unit Number of units produced per year S12.00 200 10.00 100 Total pected tivity 378 1B52 Direct labor-hours ,000 40 Machine-hours 2,000 20 20 3 30 3 Machine setups Production orders 10 Shipments What is the unit product cost of B52 listed above? a. $92 b. $251 c $77 d. $219 e. None of the above

Answer 1

ANSWER:

• In the given question, activity rates and total expected activities of two products (J78 and B52) of Larner Corporation is given and based on that we have to calculate unit product cost of B52.
• To calculate unit cost of the product B52, first of all we have to calculate total activity cost of the product as per given details

Activity cost pool	Activity rate	Total Expected Activity	Total Activity cost
Labor related	8	40	320
Machine related	10	20	200
Machine setups	40	3	120
Production orders	90	3	270
Shipments	190	3	570
General factory	13	40	520
		Total Activity Cost	2000

• Hence, Total Activity cost for product B52 is 2000 and total 100 units are produced , so that 2000/100= 20 per unit activity cost incurred
• Direct material cost and Direct labor cost are given in question, hence cost per unit of product B52 can be calculated as below

Type of cost	Per unit cost of B52
Direct materials cost	47
Direct labor cost	10
Activity cost	20
Cost per unit of B52	77

• Hence right answer is option “c” $77.