Question

Dace Company manufactures two products, Product F and Product G. The company expects to produce and sell 3,200 units of Product F and 2,100 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 Pool	Total Cost			Product F			Product G			Total
Machine setups	$	6,300			150	setups		150	setups		300	setups
Purchase orders	$	53,320			530	orders		1,190	orders		1,720	orders
Order size	$	64,020			3,620	hours		2,200	hours		5,820	hours

Required:

Determine the overhead cost per unit for each product using the activity-based costing approach. (Do not round your intermediate calculations. Round your final answers to 2 decimal places.)

Answer 1

Solution

	Total Activity cost	Activity Cost per unit
Product F	$        59,400.00	$                18.56
Product G	$        64,240.00	$                30.59

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost	Expected Activity (B)	Activity rate (A/B)
Machine Setups	Number of Setups	$          6,300.00	300.00	$          21.00	Per Setups
Purchase Orders	Number of Orders	$         53,320.00	1720	$          31.00	Per Orders
Order size	Number of Hours	$         64,020.00	5820	$          11.00	Per Hours

Cost assigned to Product F
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Machine Setups	$           21.00	150	$                  3,150
Purchase Orders	$           31.00	530	$                16,430
Order size	$           11.00	3620	$                39,820
Total Overheads assigned			$                59,400
Production			3200
Overhead cost per unit			$ 18.56

Cost assigned to Product G
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Machine Setups	$           21.00	150	$            3,150.00
Purchase Orders	$           31.00	1190	$          36,890.00
Order size	$           11.00	2200	$          24,200.00
Total Overheads assigned			$          64,240.00
Production			2100
Overhead cost per unit			$ 30.59