Question

Olmo, Inc., manufactures and sells two products: Product KO and Product H9. The annual production and sales of Product of KO is 600 units and of Product H9 is 600 units. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Estimated Ex Activit Activity Cost Pools Measures Overhead Cost Product Ko Product H9 Tota.l 7,200 900 6,500 Labor-related Production orders Order size $ 550,708 53,719 836,316 $1,440,743 4,800 700 2,900 2,400 200 3,600 DLHS orders MHS The overhead applied to each unit of Product H9 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) Multiple Choice

a. S1,09782 per unit
b. S77196 per unit
c. $600.31 per unit
d. S305.96 per unit

Answer 1

a) $1,097.84 per unit

Step-by-step explanation:

to calculate the cost we take each activity's estimated overhead cost and divide by total consumption that is called the Predetermined Overhead Rate (POR). After getting the POR we then multiply it by Product H9 consumption

For labor = $550708/7200 =$76.49 *2400 =$183,576

For Order =$53,719/900 =$59.69 *200 = $11,938

For Size =$836,316 /6500 =$128.67*3600=$463,190

TOTAL =$658,704

divide by units produced / 600

Overhead cost per unit =$1,097.84

Answer 2

S1,09782 per unit is the correct answer

Step-by-step explanation:

Overhead cost/activity=Total overhead/Total activity

Hence overhead cost per:

Direct labor hours=550708/7200=$76.49(Approx)

Orders=53719/900=$59.69(Approx)

Machine hours=836316/6500=$128.66(Approx)

Hence total cost related to H9=(76.49*2400)+(59.69*200)+(128.66*3600)=$658690

Hence cost per unit=$658690/600 units

=$1097.82(Approx).