Question

Xie Company identified the following activities, costs, and activity drivers for this year. The company manufactures two types of go-karts: Deluxe and Basic.

Activity	Expected Costs			Expected Activity
Handling materials	$	710,000			100,000	parts
Inspecting product		985,000			1,500	batches
Processing purchase orders		190,000			700	orders
Paying suppliers		260,000			500	invoices
Insuring the factory		385,000			40,000	square feet
Designing packaging		160,000			2	models

Assume that the following information is available for the company’s two products for the first quarter of this year.

	Deluxe Model		Basic Model
Production volume	10,000	units	30,000	units
Parts required	20,000	parts	30,000	parts
Batches made	250	batches	100	batches
Purchase orders	50	orders	20	orders
Invoices	50	invoices	10	invoices
Space occupied	10,000	sq. ft.	7,000	sq. ft
Models	1	model	1	model

  
Required:
Compute activity rates for each activity and assign overhead costs to each product model using activity-based costing (ABC). What is the overhead cost per unit of each model? (Round activity rate and average OH cost per unit answers to 2 decimal places.)

Answer 1