Question

Tucker Corporation has provided the following data from its Activity-Based Costing system: Activity Cost Pool Total Estimated Cost Total Estimated Activity Assembly $100,000 40,000 machine hours Inspection $10,000 800 inspections Customer Service $15,000 200 orders Data concerning the company's product A780 appear below: Units produced 125 Direct labor hours used 500 Machine hours used 900 Number of orders 30 Inspections 50 Direct materials cost $15,000 total for the job Direct labor rate $15.00 per hour According to the Activity-Based Costing system, what is the total per unit cost of an A 780?

Answer 1

Per assembly cost = $100,000/40,000 Machine hour = $2.5 / Hr

Per Inspection cost = $10,000/800 inspections = $12.5 / inspection

Per customer service cost = $15,000/200 orders = $75 / order

Data concerning company's product A780

1. Total direct labor cost = 500 * $15 = $7,500

2. Total machine hours cost = 900 * $2.5 = $2,250

3. Total customer service cost = 30 * $75 = $2,250

4. Total Inspection cost = 50 * $12.5 = $625

5. Total direct materials cost = $15,000

Total cost for producing A780 = $(7,500 + 2,250 + 2,250 + 625 + 15000) = $27,625

Units produced = 125

Total per unit cost of A780 = $27,625 / 125 units produced = $221 (Answer)