Question

The company makes 340 units of product P23F a year, requiring a total of 710 machine-hours, 80 orders, and 40 inspection-hours per year. The product's direct materials cost is $40.05 per unit and its direct labor cost is $14.35 per unit. The product sells for $121.90 per unit. According to the activity-based costing system, the product margin for product P23F is:

Answer 1

$ 5,401.60

Step-by-step explanation:

Activity cost pool

Assembly: $ 698,720 (Total Cost) / $ 44,000 (Total activity machine-hours)

= $ 15.88 per machine-hour

Processing Orders: $ 90,763 (Total cost) / 1,900 orders = 47.77 per order

Inspection: $ 119,535 / 1,950 inspection-hours = $61.30 per inspection-hour

Overhead Costs:

Assembly: 15.88 per MH *710 MHs = 11,274.80

Processing Orders: $ 47.77 per order * 80 orders = $3,821.60

Inspection: $ 61.30 per IH * 40 IHs = 2,452.00

Sales: (340 * 121.90) = $ 41,446.00

Costs:

Direct materials (340 * 40.05) = $ 13,617.00

Direct labor (340 * $ 14.35) = $ 4,879.00

Assembly $ 11,274.80

Processing $ 3,821,60

Inspection $ 2,452.00

Total of costs: $ 36,044.40

Product Margin: (Costs - Sales) $ 5,401.60