Question

Olmo, Inc., manufactures and sells two products: Product K0 and Product H9. The annual production and sales of Product of K0 is 1,000 units and of Product H9 is 1,000 units. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

Activity Cost Pools	Activity Measures	Estimated Overhead Cost			Expected Activity
					Product K0	Product H9	Total
Labor-related	DLHs	$	549,808		2,000	1,000	3,000
Production orders	orders		52,819		1,100	600	1,700
Order size	MHs		835,416		3,400	3,600	7,000
		$	1,438,043

The overhead applied to each unit of Product H9 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.)

Answer 1

Answer- The overhead applied to each unit of Product H9 under activity-based costing is closest to =$631.57 per unit.

Explanation- overhead applied to each unit of Product H9 = Total overhead applied to Product H9/ No. of units of Product H9

= $631572/1000 units

= $631.57 per unit

Where- Total overhead applied to Product H9 = Labor related+ Production orders+ Order size

= ($183.27 per hour*1000 hours)+ ($31.07 per order*600 orders)+ ($119.35 per machine hour*3600 hours)

= $183270+$18642+$429660

= $631572

Calculation of actvity rate
Activity cost pool	Activity Measure	Estimated overhead cost (a)	Expected activity (b)	Activity rate (c=a/b)
		$		$
Labor related	No. of direct labor hours	549808	3000	$183.27 per labor hour
Production orders	No. of orders	52819	1700	$31.07 per order
Order size	No. of machin hours	835416	7000	$119.35 per machine hour
Total		1438043