Question

Olmo, Inc., manufactures and sells two products: Product K0 and Product H9. The annual production and sales of Product of K0 is 900 units and of Product H9 is 900 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	$	549,608		9,000	4,500	13,500
Production orders	orders		52,619		1,000	600	1,600
Order size	MHs		835,216		4,000	2,600	6,600
		$	1,437,443

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

rev: 03_25_2018_QC_CS-119201

Multiple Choice

• $203.55 per unit

• $591.07 per unit

• $365.59 per unit

• $319.43 per unit

Answer 1

Correct answer-------$591.07 per unit

Working

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Labor related	Number of DLH	$ 549,608	13500	$             40.71	Per DLH
Production orders	Number of Order	$ 52,619	1600	$             32.89	Per Order
Order size	Number of MH	$ 835,216	6600	$          126.55	Per MH

.

Cost assigned to Classic
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Labor related	$           40.71	4,500.00	$ 183203
Production orders	$           32.89	600.00	$ 19,732
Order size	$        126.55	2,600.00	$ 329024
Total Overheads assigned			$ 531959
Production			900.00
Overhead cost per unit			$ 591.07