Question

Lillich, Inc., manufactures and sells two products: Product U6 and Product R5. 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 U6 640 8.4 5,376 Product R5 1,015 5.4 5,481 Total direct labor-hours 10,857 The direct labor rate is $27.50 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product U6 $249.30 Product R5 $166.70 The company is considering adopting 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 U6 Product R5 Total Labor-related DLHs $ 196,138 5,376 5,481 10,857 Production orders orders 67,340 800 700 1,500 Order size MHs 1,015,108 5,400 5,700 11,100 $ 1,278,586

The unit product cost of Product V9 under activity-based costing is closest to:______.

Answer 1

Lillich, Inc.

The unit product cost of Products U6 under activity-based costing is closest to: $1,460

Step-by-step explanation:

a) Data about expected production of Products U6 and R5:

Expected Direct Labor-Hours Total Direct

Production Per Unit Labor-Hours

Product U6 640 8.4 5,376

Product R5 1,015 5.4 5,481

Total direct labor-hours 10,857

The direct labor rate is $27.50 per DLH.

Direct Materials Cost per Unit Product U6$249.30 Product R5 $166.70

Activity Cost Pools Activity Estimated Expected Activity

Measures Overhead Product U6 Product R5 Total

Cost

Labor-related DLHs $ 196,138 5,376 5,481 10,857

Production orders Orders 67,340 800 700 1,500

Order size MHs 1,015,108 5,400 5,700 11,100

$1,278,586

Overhead Costs:

Product U6 Product R5 Total

Labor-related overhead costs $97,121 $99,017 $196,138

Production orders 35,915 31,425 67,340

Order size 493,836 521,272 1,015,108

Manufacturing overheads $626,872 $651,714 $1,278,586

The direct labor rate is $27.50 per DLH

Product U6 Product R5 Total

Expected Production 640 1,015

Direct labor hours 5,376 5,481 10,857

Direct Materials Cost per Unit $249.30 $166.70

Direct material costs $159,552 $169,200.50 $328,752.50

Direct labor costs 147,840 150,727.50 298,567.50

Manufacturing overhead 626,872 651,714.00 1,278,586.00

Total production costs $934,264 $971,642.00 $1,905,906.00

Unit cost $1,459.79 $957.28