Question

11:00 PM Thu Nov 14 al 21%D Test on chapters 7 & 8 CALCULATOR PRINTER VERSION BACK NE Testbank Exercise 2 Megan Industries manufactures several products including a basic case for a popular smart phone. The company is considering adopting an activity-based costing approach for setting its budget. The company's production activities, budgeted activity costs, and cost drivers for the coming year are as follows. Activity Machine setup Inspection Materials receiving Activity overhead $ $196,020 190,850 201,780 Cost driver # of setups # of quality tests # of purchase orders Cost driver quantity 810 550 1,770 The budgeted data for smart phone case production are as follows. Direct materials Direct labor Number of setups Number of quality tests Number of purchase orders Production $2.50 per unit $0.60 per unit 99 361 56 19,550 units (a) Your answer is correct. Calculate the activity rate for each cost pool. Machine setup 242 per setup Inspection 347 per test Materials receiving 119 per PO 114 Click if you would like to Show Work for this question: Open Show Work SHOW SOLUTION Attempts: 1 of 1 used (b) Calculate the activity based unit cost of the smart phone case. (Round answer to 2 decimal places, e.g. 1.64.) Activity-based unit cost $ Click if you would like to Show Work for this question: Open Show Work

Answer 1

Solution:

Computation of Overhead Cost per unit of Smrt Phone Case
Activity	Activity Rate	Cost Driver used	Overhead Allocated
Machine setup	$242.00	99	$23,958
Inspections	$347.00	361	$1,25,267
Materials Receiving	$114.00	56	$6,384
Total Cost assigned			$1,55,609
/Production units			19550
Overhead Cost per unit			$7.96

Activity based unit cost = Direct materials + Direct labor + Overhead per unit = $2.50 + $0.60 + $7.96 = $11.06