Question

Hadley, Inc. manufactures a product that uses $23 in direct materials and $9 in direct labor per unit. Under the traditional costing system Hadley uses, manufacturing overhead applied to each unit is $13. However, Hadley is considering switching to an ABC system. Under the ABC system, the total activity cost would be $31. What is the total manufacturing cost per unit for Hadley under the ABC system?

a. $32
b. $45
c. $63
d. $31

Answer 1

The total manufacturing cost per unit for Hadley under the ABC system is the sum of direct materials, direct labor, and total activity cost, which adds up to $63.

The total manufacturing cost per unit for Hadley under the Activity-Based Costing (ABC) system would be the sum of the direct materials, direct labor, and total activity cost. Under the ABC system, the total activity cost provided is $31. Therefore, the calculation would be: $23 (direct materials) + $9 (direct labor) + $31 (ABC system activity cost) = $63 total manufacturing cost per unit. Hence, the correct answer is $63 per unit.