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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 Assembly Inspection Shipping Budgeted Cost $884406 $655248 S347388 Cost Base # of DL hours # of units # of batches Cost Base Volume 32830 22650 182 Budgeted data relating to the production of M1 for 20x9 is given below: Number of units Units per batch Direct labour hours ( $17 per hour) Direct materials (a $12.30 per kg.) 1500 79 20223 hours 845 kg. What is the total cost of producing M1 in 20x9? Select one a. $634816 b. $1093154 c. $624422 d. $978607
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option D i.e $ 978607 is the correct answer. further explanation is given below:Schedule Showing computation of activity based overhead rates (per cost driver). Activity based overhead rate Budgeted cost /Cost Based Volume Budgeted Cost Cost Based Activity based overhead rate Activity cost pool Volume Assembly Inspection Shipping $ 884,406 $ 655,248 $ 347,388 32830 DL hours 26.94 Per DL Hour 22650 Units 28.93 Per Unit 182 Batches $ 1,908.73 Per Batch Calculate activity based overhead rate by dividing budgeted cost by cost based volume. Now multiply this activity based rate with budgeted cost base Schedule showing assigning of each product based on the use of cost driver Cost Assigned Budgeted Cost Volume* Activity based overhead rate Activity cost pool M1 Product Budgeted Cost Base Activity based overhead rate Cost Assigned Assembly Inspection Shipping 20223 DL hours 1500 Units 18.99 Batches 26.94 Per DL Hour $ 28.93 Per Unit 544,787 43,394 36,242 $ 1,908.73 Per Batch No of Batches 1500 units/79 units in per batch 18.99 batches Total cost of M1 product under ABC method: Direct Material Direct Labor Assembly Inspection Shipping Total Unit Cost M1 Product $ 10,394 (845 Kg $12.3) $ 343,791 (20223 hours $17) $ 544,787 $ 43,394 S 36,242 $ 978,607 Option D

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