Question

Cadott has the following estimates for the upcoming year:

Activity Cost Pool Activity Rate
Machine-hours $3.60 per machine-hour
Machine setups $260 per setup
Product testing $128 per test

Cost and activity information for two of Cadott’s products is as follows:

P34 W85
Direct materials $38,000 $34,250
Direct labor $23,000 $30,500
Machine-hours 1,560 1,260
Machine setups 31 86
Tests 56 56
Number of units produced during the year 10,000 25,000

Required:
Compute the unit product cost for product W85.

Answer 1

$3.95

Step-by-step explanation:

To compute the unit cost of product W85, we need to determine the total product cost for product W85

= $34,250 + $30,500 + [ 1,260 × 3.6] + [86 × 260] + [56 × 128]

= $64,750 + $4,536 + $22,360 + $7,168

= $98,814

Therefore, the unit product cost for product W85

= Total product cost for product W85/Units produced during the year for product W85

= $98,814/25,000

= $3.95