Question

Daston Company manufactures two products, Product F and Product G. The company expects to produce and sell 1,470 units of Product F and 2,560 units of Product G during the current year. Data relating to the company’s three activity cost pools are given below for the current year:

			Total Activity
Activity Cost Pools	Total Cost		Product F		Product G		Total
Machine setups	$	33,440	166	setups	186	setups	352	setups
Purchase orders	$	191,250	580	orders	1,970	orders	2,550	orders
Order size	$	132,430	3,220	hours	3,750	hours	6,970	hours

Required:

Using the activity-based costing approach, determine the overhead cost per unit for each product. (Round your answers to 2 decimal places.)

Answer 1

The overhead rates for each individual activity centers can be calculated as follows:

Activity Cost Pool	Total cost(x)	Total Activity for both Products (y)	Overhead Rate(=x/y)
Machine set up	$           33,440	352	$                    95
Purchase order	$         191,250	2,550	$                       75
Order size	$         132,430	6,970	$                       19

Then total overhead cost charged to each product can be calculated by segregating individual activity cost:

		Product F		Product G
	Overhead Rate per activity(a)	Activity(b)	Amount(=a x b)	Activity(c)	Amount(=a x c)
Machine set up	$                     95	166	$           15,770	186	$        17,670
Purchase order	$                       75	580	$           43,500	1,970	$        147,750
General factory	$                       19	3,220	$           61,180	3,750	$        71,250
Total overhead cost			$         120,450		$      236,670

	Product F	Product G
Total Overhead cost	120,450	236,670