Question

According to the activity-based costing system, what was the total cost of the activity "Supporting Assembly" for Latif Corporation last year, given the following details?

Latif Corporation purchased a product for $15.60 per unit.
They ordered a total of 1,100 units in 2 orders.
7 batches were required to fulfill the orders.
Direct materials cost: $7.85 per unit.
Direct labor cost: $1.90 per unit, requiring 0.10 direct labor-hours per unit.
Activity-based costing rates:
Supporting Assembly: $6.55 per direct labor-hour.
a) $500
b) $900
c) $1,000
d) $1,200

Answer 1

The total cost of the Supporting Assembly activity for Latif Corporation last year, calculated using the activity-based costing system, is $720.50 when rounding to the nearest whole dollar. However, this value does not exactly match any of the provided options, suggesting there may be an error in the options listed.

Step-by-step explanation:

To calculate the total cost of the activity "Supporting Assembly" for Latif Corporation last year using the activity-based costing system, we must determine the total amount of direct labor-hours used for the production and then apply the activity-based costing rate for Supporting Assembly.

First, we calculate the total direct labor-hours by multiplying the number of units by the direct labor-hours per unit: 1,100 units × 0.10 direct labor-hours per unit = 110 direct labor-hours. Next, we multiply the total direct labor-hours by the Supporting Assembly costing rate: 110 direct labor-hours × $6.55 per direct labor-hour = $720.50.

However, the options provided appear to be rounded to whole numbers. We would round $720.50 to the nearest whole number, which gives us $721. Thus, none of the provided options accurately reflect the calculated total cost. It seems there might be a mistake in the options given.