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	$	5.00	per direct labor-hour
Machine-related	$	6.00	per machine-hour
Machine setups	$	40.00	per setup
Production orders	$	100.00	per order
Shipments	$	120.00	per shipment
General factory	$	6.00	per direct labor-hour

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

	J78				B52
Direct materials cost per unit	$	6.00			$	26.00
Direct labor cost per unit	$	5.00			$	6.00
Number of units produced per year		1,000				100

	Total Expected Activity
		J78			B52
Direct labor-hours		1,300			40
Machine-hours		2,200			30
Machine setups		5			2
Production orders		7			2
Shipments		6			2

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

Solution

	J78	B52
Total Cost per unit	$                    40.12	$                     43.40

Working

	J78	B52
Direct material	$                      6.00	$                     26.00
Direct labor	$                      5.00	$                        6.00
Overheads	$                    29.12	$                     11.40
Total Cost per unit	$                    40.12	$                     43.40

.

Cost assigned to J78
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Labor related	$             5.00	1,300.00	$ 6,500
Machine related	$             6.00	2,200.00	$ 13,200
Machine setups	$           40.00	5.00	$ 200
Production order	$        100.00	7.00	$ 700
Shipments	$        120.00	6.00	$ 720.00
General factory	$             6.00	1,300.00	$ 7,800.00
Total Overheads assigned			$ 29,120
Production			1,000.00
Overhead cost per unit			$ 29.12

.

Cost assigned to B52
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Labor related	$             5.00	40	$ 200
Machine related	$             6.00	30	$ 180
Machine setups	$           40.00	2	$ 80
Production order	$        100.00	2	$ 200
Shipments	$        120.00	2	$ 240
General factory	$             6.00	40	$ 240
Total Overheads assigned			$ 1,140
Production			100.00
Overhead cost per unit			$               11.40