Question

Xie Company identified the following activities, costs, and activity drivers for 2015. The company manufactures two types of go-karts: Deluxe and Basic.

    

Activity	Expected Costs		Expected Activity
Handling materials	$	625,000	100,000	parts
Inspecting product		900,000	1,500	batches
Processing purchase orders		105,000	700	orders
Paying suppliers		175,000	500	invoices
Insuring the factory		300,000	40,000	square feet
Designing packaging		75,000	2	models

Assume that the following information is available for the company’s two products for the first quarter of 2015.

  

	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 answers to 2 decimal places.)

Answer 1