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EMD Corporation manufactures two products, Product S and Product W. Product W is of fairly recent origin, having been develop

Unit Product Cost Products Product W

Unit Product Cost .. .. Product S Product W P . mer

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Answer #1

Solution

Cost per Unit
Product S $                    38.10
Product W $                    81.10

Working

Calculation of Activity rates
Activity Cost Pool Activity driver Overhead Cost (A) Expected Activity (B) Activity rate (A/B)
Machine setup required Number of setup $ 496,080 3120 $          159.00 Per setup
purchase order required Number of order $ 50,024 676 $             74.00 Per order
Machine hour required Number of machine hour $ 246,540 17610 $             14.00 Per machine hour
Maintenance requiest issued Number of request $ 206,136 1636 $          126.00 Per request

.

Cost assigned to Product S
Activity name Activity Rates Activity ABC Cost
(A) (B) (A x B)
Machine setup required $        159.00                  1,450.00 $ 230,550
purchase order required $           74.00                      540.00 $ 39,960
Machine hour required $           14.00                  7,090.00 $ 99,260
Maintenance request issued $        126.00                      695.00 $ 87,570
Total Overheads assigned $           457,340.00
Production             75,000.00
Overhead cost per unit $ 6.10

.

Cost assigned to Product W
Activity name Activity Rates Activity ABC Cost
(A) (B) (A x B)
Machine setup required $        159.00 1670 $ 265,530
purchase order required $           74.00 136 $ 10,064
Machine hour required $           14.00 10520 $ 147,280
Maintenance request issued $        126.00 941 $ 118,566
Total Overheads assigned $           541,440.00
Production             15,000.00
Overhead cost per unit $               36.10

.

ABC Costing
Product S Product W
Direct material $                    21.00 $                     25.00
Direct labor   $                    11.00 $                     20.00
Overheads $                      6.10 $                     36.10
Total Cost per unit $                    38.10 $                     81.10
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