Question

Testbank Exercise 3 Stockin Company produces Tablets and Books. Total overhead costs traditionally have been allocated on the basis of direct labor hours. After implementing activity-based costing, managers determined the following cost pools and cost drivers. They also decided that general costs should no longer be allocated to products. Activity Pool Binding Printing Product design General Total overhead costs Department Costs Cost driver $236,731.25 Number of units 842,058.00 Machine hours 187,488.00 Change orders 694,522.75 None $1,960,800.00 Other information is as follows: Units Direct materials cost per unit Direct labor cost per unit Direct labor hours Machine hours Change orders Tablets 77,300 $4.00 $5.00 30,400 147,600 2,016 Books 19,325 $12.00 $10.00 15,200 110,700 4,032 (a) Determine the unit product cost for Tablets using the traditional costing system. (Round answer to 2 decimal places, e.g. 1.64.) Unit product cost for Tables $ Click if you would like to Show Work for this question: Open Show Work

Answer 1

Unit product cost for tables = $25.91

Working

	Tables
Direct material	$                      4.00
Direct labor	$                      5.00
Overheads	$                    16.91
Total Cost per unit	$                    25.91

.

Cost assigned to Tables
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Binding	$                     43.00*	30,400.00	$     1,307,200.00
Total Overheads assigned			$     1,307,200.00
Production			77,300.00
Overhead cost per unit			$ 16.91

.*Overhead rate =

Calculation of Activity rates
Total overheads	Number of labor hours	$    1,960,800.00	45600	$             43.00	Per labor hour