Question

Fleurant, Inc., manufactures and sells two products: Product W2 and Product P8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Direct Labor-Hours Production Per Unit 400 500 Product W2 Product P8 Total direct labor-hours Total Direct Labor-Hours 2,000 2,000 4,000 The direct labor rate is $37.10 per DLH. The direct materials cost per unit is $203.60 for Product W2 and $140.30 for Product P8. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Expected Activity Activity Measures DLHS orders MHS Activity Cost Pools Labor-related Production orders Order size Estimated Overhead Cost $218,576 18,538 202,886 $440,000 Product W2 2,000 Product P8 2,000 380 3,680 Total 4,000 860 7,560 3,880 The overhead applied to each unit of Product W2 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.)

Answer 1

THE OVERHEAD APPLIED TO EACH UNIT OF PRODUCT W2 UNDER ACTIVITY BASED COSTING: $559.42

Estimated overhead cost Total expected activity Activity cost pool Activity measures Labor-related DLHS Production orders Orders Order size MHS Totals 218,576 18,538 202,886 440,000 4,000 DLHS 860 orders 7,560 MHs Activity rate a:b $ 54.64 per DLH $ 21.56 per order $ 26.84 per MH

Activity cost pool Activity rate W2 P8 Labor-related $ 54.64 per DLH Production orders $ 21.56 per order Order size $ 26.84 per MH $ 109,280.00 $ 109,280.00 (2000 DLHS * $54.64) (2000 DLHs * $54.64) $ 10,348.80 $ 8,192.80 (480 orders x $21.56) (380 orders < $21.56) $ 104,139.20 $ 98,771.20 (3880 MHS $26.84) (3680 MHS $26.84) $ 223,768.00 $ 216,244.00 400 500 559.42 $ 432.49 Totals (a) Total expected production in units (b) Overhead applied per unit (a - b)

Direct materials Direct labor w2 P8 $ 203.60 $ 140.30 $ 185.50 $ 148.40 ($37.10x5 hrs) ($37.10 4 hrs) 559.42 $ 432.49 $ 948.52 $ 721.19 S Overheads Total costs per units