Question

Pecot Industries has provided the following data from its activity-based costing system:

Activity Cost Pools	Est. Overhead Cost	Expected Activity
Assembly	$498,520	44,000	Machine hours
Processing orders	$54,263	1,100	Orders
Inspection	$77,589	1,110	Inspection hours

Data concerning Pecot’s product LB28 appears below:

            Number of units produced      430

            Machine hours                        990

            Number of orders                    70

            Inspection hours                      20

            Direct materials cost               $37.74 per unit

            Direct labor cost                     $10.45 per unit

Calculate the total unit product cost of LB28:

(Step 1: Determine activity rates for each activity pool

Step 2: Determine overhead costs charged to product LB28

Step 3: Add up all product costs for LB28

Step 4: Determine unit product cost)

Answer 1

Note: Since there are no instructions provided in the question regarding rounding off, kindly refer to the notes mentioned after every step and round off as required.

Step 1:

Activity Cost Pools	Est. Overhead Cost	Expected Activity	Activity Rate $
Assembly	498520	44000	11.33
Processing orders	54263	1100	49.33
Inspection	77589	1110	69.90

Note: Activity rates are rounded off to 2 decimal places.

Step 2:

Activity Cost Pools	Activity Rate $	Expected Activity	Overhead Costs Charged $
Assembly	11.33	990	11217
Processing orders	49.33	70	3453
Inspection	69.90	20	1398
Total $			16068

Note: Overhead costs charged to product LB28 are rounded off to the nearest whole dollar.

Step 3:

Direct materials cost (430 x $37.74)	16228
Direct labor cost (430 x $10.45)	4494
Overhead cost	16068
Total product cost $	36790

Note: Total product cost is rounded off to the nearest whole dollar.

Step 4:

Total product cost $	36790
Number of units produced	430
Unit product cost $	85.56

Note: Unit product cost is rounded off to 2 decimal places.