Question

A company manufactures and sells two products: Product A1 and Product C4. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:

	Expected Production	Direct Labor-Hours Per Unit	Total Direct Labor-Hours
Product A1	300	4.0	1,200
Product C4	600	2.0	1,200
Total direct labor-hours			2,400

The direct labor rate is $25.90 per DLH. The direct materials cost per unit is $285 for Product A1 and $244 for Product C4.

The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

		Estimated		Expected Activity
Activity Cost Pools	Activity Measures	Overhead Cost		Product A1	Product C4	Total
Labor-related	DLHs	$	42,600	1,200	1,200	2,400
Production orders	orders		67,630	400	600	1,000
Order size	MHs		137,820	3,300	3,100	6,400
		$	248,050

The total cost per unit of Product C4 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.)

Answer 1

Answer- The total cost per unit of Product C4 under activity-based costing is closest to = $510.17 per unit.

Explanation-

Calculation of total cost per unit of Product C4
(Using Actvity Based Costing Method)
Particluars		Amount
		$
Direct materials	600 units*$244 per unit	146400
Direct labor	1200 hours*$25.90 per hour	31080
Labor related	1200 hours*$17.75 per hour	21300
Production orders	600 orders*$67.63 per order	40578
Order size	3100 MHs*$21.53 per MHs	66743
Total budegted costs (a)		306101
Total no. of units produced (b)	600 units
Activity-based unit cost (c=a/b)	$510.17 per unit

Where-

Calculation of actvity rate
Activity cost pool	Activity Measure	Estimated overhead cost (a)	Expected activity (b)	Activity rate (c=a/b)
		$		$
Labor related	No. of direct labor hours	42600	2400	$17.75 per labor hour
Production orders	No. of orders	67630	1000	$67.63 per order
Order size	No. of machin hours	137820	6400	$21.53 per machine hour
Total $		248050