Question

Using ABC to compute product costs per unit

Jaunkas, Corp., manufactures mid-fi and hi-fi stereo receivers. The following data have been summarized:
Mid-Fi Hi-Fi
Direct materials cost per unit $ 400 $ 1,300
Direct labor cost per unit 400 300
Indirect manufacturing cost per unit ? ?
Indirect manufacturing cost information includes the following:
Activity Allocation Rate Mid–Fi Hi–Fi
Setup $1,700/per setup 39 setups 39 setups
Inspections $ 400/per hour 45 hours 15 hours
Machine maintenance $ 10/per machine 1,900 machine 1,200 machine
hour hours hours
The company plans to manufacture 200 units of the mid-fi receivers and 250 units of the hi-fi receivers.
Requirement
Calculate the product cost per unit for both products using activity-based costing.

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

Activity Allocation Rate Mid–Fi Hi–Fi

Setup $1,700/per setup 39 setups 39 setups

Inspections $ 400/per hour 45 hours 15 hours

Machine maintenance $ 10/per machine 1,900 machine 1,200 machine

First, we need to allocate indirect costs using the following formula:

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

Mid-Fi:

Allocated MOH= 1,700*39 + 400*45 + 10*1,900= $103,300

Hi-Fi:

Allocated MOH= 1,700*39 + 400*15 + 10*1,200= $84,300

Now, we can calculate the unitary cost.

Mid-Fi:

Unitary indirect costs= 103,300/200= $516.5

Unitary cost= 400 + 400 + 516.5= $1,316.5

Hi-Fi:

Unitary indirect cost= 84,300/250= $337.2

Unitary cost= 1,300 + 300 + 337.2= $1,937.2