Question

Ravelo Corporation has provided the following data from its activity-based costing system: Activity Cost Pools Estimated Overhead Cost Expected Activity Assembly $ 505,520 47,500 machine-hours Processing orders $ 57,763 1,450 orders Inspection $ 81,089 1,460 inspection-hours Data concerning the company's product L19B appear below: Annual unit production and sales 500 Annual machine-hours 1,060 Annual number of orders 140 Annual inspection hours 90 Direct materials cost $ 44.74 per unit Direct labor cost $ 17.45 per unit According to the activity-based costing system, the unit product cost of product L19B is closest to:

Answer 1

Total unitary cost= $105.9

Step-by-step explanation:

First, we need to calculate the activities rates:

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

Assembly= 505,520 / 47,500= $10.64 per machine-hour

Processing orders= 57,763 / 1,450= $39.84 per order

Inspection= 81,089 / 1,460= $55.54 per inspection-hour

Now, we can allocate overhead to Product L19B:

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

Assembly= 10.64*1,060= 11,278.4

Processing orders= 39.84*140= 5,577.6

Inspection= 55.54*90= 4,998.6

Total allocated costs= $21,854.6

Unitary allocated overhead= 21,854.6 / 500= $43.71

Finally, the unitary cost and product margin:

Total unitary cost= 44.74 + 17.45 + 43.71

Total unitary cost= $105.9