Question

Paparo Corporation has provided the following data from its activity-based costing system: Activity Cost Pool Total Cost Total Activity Assembly $ 794,300 47,000 machine-hours Processing orders $ 61,280 1,600 orders Inspection $ 109,681 1,430 inspection-hours Data concerning the company's product Q79Y appear below: Annual unit production and sales 500 Annual machine-hours 1,130 Annual number of orders 115 Annual inspection hours 20 Direct materials cost $ 42.00 per unit Direct labor cost $ 41.31 per unit According to the activity-based costing system, the average cost of product Q79Y is closest to:

Answer 1

Unitary costs= $133.38

Step-by-step explanation:

First, we need to calculate the activities rate:

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

Assembly= 794,300 / 47,000= $16.9 per machine-hour

Processing orders= 61,280 / 1,600= $38.3 per order

Inspection= 109,681 / 1,430= $76.7 per inspection-hour

Now, we can allocate overhead:

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

Assembly= 16.9*1,130= 19,097

Processing orders= 38.3*115= 4,404.5

Inspection= 76.7*20= 1,534

Total allocated costs= $25,035.5

Finally, the unitary costs:

Unitary allocated costs= 25,035.5/500= $50.07

Unitary costs= 50.07 + 42 + 41.31

Unitary costs= $133.38