Question

Salvatori, Inc., manufactures and sells two products: Product A4 and Product Q5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product A4 600 7.0 4,200 Product Q5 900 4.0 3,600 Total direct labor-hours 7,800 The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product A4 Product Q5 Total Labor-related DLHs $ 163,058 4,200 3,600 7,800 Machine setups setups 10,550 800 700 1,500 Order size MHs 499,527 4,200 4,500 8,700 $ 673,135 The overhead applied to each unit of Product A4 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.)

Answer 1

Overhead applied per unit = $557.61

Explanation :

As per the data given in the question,

Particulars A B C=A ÷B D C ×D

Activity cost Estimated Total expected Activity Product A4 Product A4

Pool OH cost Activities Rate Expected activities total OH cost

Labor related $163,058 $7,800 20.90 4,200 $87,780

Machine setup $10,550 $1,500 7.03 800 $5,624

Order size $499,527 $8,700 57.42 4,200 $241,164

Total overhead cost = $334,568

Activity rate = Estimated OH cost ÷ Total expected activity

Product A4 overhead = Product A4 expected activity ×activity rate

Overhead applied per unit = Total overhead applied ÷ Expected production of A4

= $334,568 ÷ 600 units

=$557.61