Question

Ravelo Corporation has provided the following data from its activity-based costing system:

Activity Cost Pools	Estimated Overhead Cost		Expected Activity
Assembly	$	506,520	48,000	machine-hours
Processing orders	$	58,263	1,500	orders
Inspection	$	81,589	1,510	inspection-hours

Data concerning the company's product L19B appear below:

Annual unit production and sales		510
Annual machine-hours		1,070
Annual number of orders		150
Annual inspection hours		100
Direct materials cost	$	45.74	per unit
Direct labor cost	$	18.45	per unit

According to the activity-based costing system, the unit product cost of product L19B is closest to

Answer 1

Answer--------Unit product cost = $108.35

Working

	Product L19B
Direct material	$                    45.74
Direct labor	$                    18.45
Overheads	$                    44.16
Total Cost	$                  108.35

.

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Assembly	Number of machine hour	$ 506,520	48000	$             10.55	Per machine hour
Processing orders	Number of Order	$ 58,263	1500	$             38.84	Per Order
Insection	Number of Inspection	$ 81,589	1510	$             54.03	Per Inspection

.

Cost assigned to Product L19B
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Assembly	$           10.55	1,070.00	$ 11,291
Processing orders	$           38.84	150.00	$ 5,826
Insection	$           54.03	100.00	$ 5,403
Total Overheads assigned			$ 22,521
Production			510.00
Overhead cost per unit			$ 44.16