Question

Dobles Corporation has provided the following data from its activity-based costing system: The Assembly Cost Pool has a total costs of $228,060 (with 18,000 machine-hours), the Processing Cost Pool has a total costs of $34,068 (with 1,200 orders) and the Inspection Cost Pool has a total costs of $125,560 (with 1,720 inspection-hours). The company makes 420 units of product D28K a year, requiring a total of 460 machine-hours, 80 orders, and 10 inspection-hours per year. The product's direct materials cost is $48.96 per unit and its direct labor cost is $25.36 per unit. According to the activity-based costing system, the unit product cost of product D28K is closest to:

A.
$95.34 per unit
B.
$93.60 per unit
C.
$74.32 per unit
D.
$89.93 per unit

Answer 1

The unit product cost of product D28K is closest to $21.77 per unit when using activity-based costing.

Step-by-step explanation:

To calculate the unit product cost of product D28K using activity-based costing, we need to allocate the costs from the cost pools to the product based on the activity drivers. First, we calculate the cost per machine-hour for the Assembly Cost Pool by dividing the total costs of $228,060 by the total machine-hours of 18,000. The cost per machine-hour is $12.67. Next, we multiply the machine-hours required for product D28K by the cost per machine-hour to find the allocated cost for the Assembly Cost Pool: $12.67 * 460 machine-hours = $5,827.20.

We repeat the same process for the Processing Cost Pool and the Inspection Cost Pool. The cost per order for the Processing Cost Pool is $28.39 ($34,068 total costs / 1,200 orders), and the allocated cost for product D28K is $28.39 * 80 orders = $2,271.20. The cost per inspection-hour for the Inspection Cost Pool is $73.01 ($125,560 total costs / 1,720 inspection-hours), and the allocated cost for product D28K is $73.01 * 10 inspection-hours = $730.10.

Finally, we add up the allocated costs for all three cost pools and divide it by the number of units of product D28K (420) to find the unit product cost: ($5,827.20 + $2,271.20 + $730.10) / 420 = $21.77. Therefore, the unit product cost of product D28K is closest to $21.77 per unit.

Answer 2

A.

$95.34 per unit

Step-by-step explanation:

activity cost pool total cost(a) total activity(b) activity rate

assembly $228060 180000 hours $12.67

processing oders $34068 1200 orders $28.39

inspection $125560 1720 hours $73.00

Cost per activity is obtained by dividing total cost for each activity pool with its respective total activity. Cost per activity is helpful to identify the total cost allocated to each activity.

particulars expected activity per activity rate total cost

assembly 460 hours $12.67 $5828.20

processing orders 80 orders $28.39 $2271.20

inspection 10 hours $73.00 $730.00

manufacturing overhead $8829.40

Manufacturing overhead is the other costs that are neither direct material cost and nor direct labor cost. Here we add the total cost incurred in each cost pool to arrive at manufacturing overhead of $8,829.40. The manufacturing overhead incurred is allocated to each cost pool as per the activity and per activity rate.

manufacturing overhead per unit = manufacturing overhead/total units produced

= $8829.40/420

= $21.02

product cost per unit = direct material per unit + direct labor per unit + manufacturing overhead cost per unit

= $48.96 + $25.36 + $21.02

= $95.34

Therefore, the unit product cost of product D28K is closest to $95.34