Question

Paparo Corporation has provided the following data from its activity-based costing system:

Activity Cost Pool Total Cost Total Activity
Assembly $ 926,800 56,000 machine-hours
Processing orders 68,310 1,800 orders
Inspection $ 103,360 1,360 inspection-hours
Data concerning the company's product Q79Y appear below:
Annual unit production and sales 700
Annual machine-hours 1060
Annual number of orders 80
Annual inspection hours 20
Direct materials cost 51.00 per unit
Direct labor cost $41.17 per unit
According to the activity-based costing system, the average cost of product Q79Y is closest to:_______.

Answer 1

Unitary total cost= $123.74

Step-by-step explanation:

First, we need to calculate the activities rates to allocate costs:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Assembly= 926,800/56,000= $16.55 per machine-hour

Processing orders= 68,310 / 1,800= $37.95 per order

Inspection= 103,360 / 1,360= $76 per inspection-hour

Now, we can allocate costs based on actual activity:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Assembly= 16.55*1,060= 17,543

Processing orders= 37.95*80= 3,036

Inspection= 76*20= 1,520

Total allocated costs= $22,099

Unitary allocated costs= 22,099/700= $31.57

Finally, the unitary total cost:

Unitary total cost= 31.57 + 51 + 41.17

Unitary total cost= $123.74