Question

Ravelo Corporation has provided the following data from its activity-based costing system:

Activity Cost Pools	Estimated Overhead Cost		Expected Activity
Assembly	$	510,520	50,000	machine-hours
Processing orders	$	60,263	1,700	orders
Inspection	$	83,589	1,710	inspection-hours

Data concerning the company's product L19B appear below:

Annual unit production and sales		550
Annual machine-hours		1,110
Annual number of orders		190
Annual inspection hours		140
Direct materials cost	$	49.74	per unit
Direct labor cost	$	22.45	per unit

According to the activity-based costing system, the unit product cost of product L19B is closest to: (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

• $117.48 per unit

• $68.11 per unit

• $114.23 per unit

• $72.19 per unit

Answer 1

Since this is Activity based costing system, let's first calculate activity based rates.

Activity Cost Pools	Estimated Overhead Cost	Expected Activity		Rates in $ (Estimated Overhead Costs / Expected activity)
Assembly	$      510,520	50,000	Machine-hours	10.2104
Processing orders	$          60,263	1,700	Orders	35.4488
Inspection	$          83,589	1,710	inspection-hours	48.8825

Now that we have the rates in hand, let's calculate the Unit Product cost by preparing a summary Cost Sheet.

Summary of Cost Sheet - Product L19B

Particulars	Calculation	Amount (in $)
Direct Materials Cost	550 Units * $49.74 per unit	$      27,357.00
Direct Labor Cost	550 Units * $22.45 per unit	$      12,347.50
Assembly cost	1,110 Machine hours * $10.2104 per Machine Hours	$      11,333.54
Ordering cost	190 Orders * $35.4488 per Order	$        6,735.28
Inspection cost	140 Inspection hours * $48.8825 per Inspection hour	$        6,843.54
Total Cost		$      64,616.86
Unit Product cost of Product L19B	Total Cost / 550 Units	$            117.49

Hence we can say that Unit product cost of Product L19B is closest to 1st Option $117.48 per unit.

I hope this helps. :)