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	$	7.00	per direct labor-hour
Machine-related	$	7.00	per machine-hour
Machine setups	$	40.00	per setup
Production orders	$	100.00	per order
Shipments	$	100.00	per shipment
General factory	$	7.00	per direct labor-hour

  

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

  

	J78				B52
Direct materials cost per unit	$	5.00			$	34.00
Direct labor cost per unit	$	4.50			$	5.00
Number of units produced per year		5,000				200

	Total Expected Activity
		J78			B52
Direct labor-hours		1,200			50
Machine-hours		3,200			20
Machine setups		5			3
Production orders		7			3
Shipments		5			3

Required:

Compute the unit product cost of each product listed above. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Answer 1

Ans.		J78	B52
	Direct materials cost per unit	$5.00	$34.00
	Direct labor cost per unit	$4.50	$5.00
	Overhead cost per unit	$8.12	$7.80
	Unit product cost	$17.62	$46.80
	*WORKING NOTES:
	*Calculations for Overhead cost per unit:
		J78			B52
	Activity cost pool	Expected activity	Activity rate	Cost	Expected activity	Activity rate	Cost
		per product (a)	(b)	Assigned (a*b)	per product (a)	(b)	Assigned (a*b)
	Labor related	1200	$7	$8,400	50	$7	$350
	Machine related	3200	$7	$22,400	20	$7	$140
	Machine setups	5	$40	$200	3	$40	$120
	Production orders	7	$100	$700	3	$100	$300
	Shipments	5	$100	$500	3	$100	$300
	General factory	1200	$7	$8,400	50	$7	$350
	Total Manufacturing Overhead			$40,600			$1,560
	*Overhead cost per unit = Total manufacturing overhead / Annual production
		J78	B52
	Total manufacturing overhead (a)	$40,600	$1,560
	Annual production   (b)	5000	200
	Overhead cost per unit   (a / b)	$8.12	$7.80