Question

Larner Corporation is a diversified manufacturer of industrial goods. The company's activity-based costing system contains the following six activity cost pools and activity rates:

Activity Cost Pool Activity Rates

Labor-related $5.00 per direct labor-hour
Machine-related $10.00 per machine-hour
Machine setups $30.00 per setup
Production orders $200.00 per order
Shipments $140.00 per shipment
General factory $10.00 per direct labor-hour

Cost and activity data have been supplied for the following products:

J78 B52
Direct materials cost per unit $5.50 $20.00
Direct labor cost per unit $4.25 $7.00
Number of units produced per year 2,000 200

Total Expected Activity
J78 B52
Direct labor-hours 1,500 50
Machine-hours 2,600 30
Machine setups 6 1
Production orders 8 1
Shipments 8 1

Required:
Compute the unit product cost of each product listed above.

Answer 1

J78= $35.45

B52= $34.2

Step-by-step explanation:

First, we need to allocate overhead:

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

J78:

Labor-related= 5*1,500= 7,500

Machine-related= 10*2,600= 26,000

Machine setups= 30*6= 180

Production orders= 200*8= 1,600

Shipments= 140*8= 1,120

General factory= 10*1,500= 15,000

Total allocated overhead= $51,400

Unitary allocated overhead= 51,400/2,000= $25.7

B52:

Labor-related= 5*50= 250

Machine-related= 10*30= 300

Machine setups= 30*1= 30

Production orders= 200*1= 200

Shipments= 140*1= 140

General factory= 10*50= 500

Total allocated overhead= $1,420

Unitary allocated overhead= 1,420/200= $7.1

Finally, the unitary cost:

J78= 5.5 + 4.2 + 25.7= $35.45

B52= 20 + 7 + 7.2= $34.2