Question

Chhom, Inc., manufactures and sells two products: Product F9 and Product U4. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:

	Expected Production	Direct Labor-Hours Per Unit	Total Direct Labor-Hours
Product F9	200	2.0	400
Product U4	1,000	1.0	1,000
Total direct labor-hours			1,400

The direct labor rate is $27.30 per DLH. The direct materials cost per unit is $297 for Product F9 and $250 for Product U4.

The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

		Estimated		Expected Activity
Activity Cost Pools	Activity Measures	Overhead Cost		Product F9	Product U4	Total
Labor-related	DLHs	$	31,200	400	1,000	1,400
Production orders	orders		49,540	600	1,000	1,600
Order size	MHs		100,950	4,000	2,800	6,800
		$	181,690

The overhead applied to each unit of Product U4 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

A. $247.70 per unit

B. $94.83 per unit

C. $129.78 per unit

D. $123.85 per unit

Answer 1

Total overhead applied to Product U4:

= ($31,200 X 1,000 / 1,400) + ($49,540 X 1,000 / 1,600) + ($100,950 X 2,800 / 6,800)

= $94,815.86

Cost per unit of U4 = $94,815,86 / 1,000 = $94.82 or $94.83

Option B