Question

Ace Company manufactures two products, X and Y. The following information is given for X only:

   X   

Annual production units                                  2,000 units                  

Direct material cost per unit of product              $15                             

Direct labor cost per unit of product                     25                            

The company uses activity-based costing. And its overhead costs are traced to two activity cost pools. The following data are given:

  

Activity cost pool	Activity measure	Activity rate	Total activity needed (for all 2,000 units of X together)
Design	Number of parts	$3 per part	3,000 parts
Processing	Direct labor hours	$8 per direct labor hour	1,000 direct labor hours
What is the total overhead cost assigned to X (for all 2,000 units together)? A. $15,000 B. $11,000 C. $13,000 D. 17,000 E. $18,000 What is the unit product cost (cost per unit)? $52.50 $48.50 $61 $36 $54.50

Answer 1

Answer:

Total overhead cost assigned to X                   = ( Design Activity rate x Total activity needed )                                   + ( Processing Activity rate x Total activity needed )                   =    ( $3 x 3,000 ) + ($8 x 1,000)                   =   $9,000 + $8,000                   =   $17,000

Total overhead cost assigned to X     =   $ 17,000

Option (D) is Correct   - $17,000

Unit product cost         = Direct material cost per unit + Direct labor cost per unit + overhead cost per unit         =   $15 + $25 + $ 17,000 / 2,000 units         =   $40 + $8.5         =   $48.50

Unit product cost   = $48.50

Option (B) is Correct   - $ 48.50