Question

Paparo Corporation has provided the following data from its activity-based costing system: Activity Cost Pool Assembly Processing orders Inspection $ $ $ Total cost Total Activity 965,700 58,000 machine-hours 76,100 2,000 orders 105,156 1,380 inspection-hours Data concerning the company's product Q79Y appear below: Annual unit production and sales Annual machine-hours Annual number of orders Annual inspection hours Direct materials cost Direct labor cost 800 1,080 90 30 $53.00 per unit $41.21 per unit According to the activity-based costing system, the average cost of product Q79Y is closest to:

Answer 1

Activity cost pool	Total cost	Total activity	Activity rate	Activity used by Q79Y	Overhead allocated to product Q79Y
Assembly	965,700	58,000 machine hours	965,700/58,000 = $16.65 per machine hour	1,080	1,080 x 16.65 = $17,982
Processing orders	76,100	2,000 orders	76,100/2,000 = $38.05 per order	90	90 x 38.05 = $3,424.5
Inspection	105,156	1,380 inspection hours	105,156/1,380 = $76.2 per inspection hours	30	30 x 76.2 = $2,286
Total					$23,692.5

Direct material cost (800 x 53)	42,400
Direct labor cost (800 x 41.21)	32,968
Overheads	$23,692.5
Total costs	$99,060.5

Average cost per unit of Q79Y = Total costs/Number of units

= 99,060.5/800

= $123.83

First option is correct

Kindly give a positive rating if you are satisfied with the answer. Feel free to ask if you have any doubt. Thanks.