Question

Exercise 4-3 Compute ABC Product Costs [LO4-3] Larner Corporation is a diversified manufacturer of industrial goods. The company's activity-based costing system contains the following six activity cost pools and activity rates: Activity Cost Pool Labor-related Machine-related Machine setups Production orders Shipments General factory Activity Rates $ 10.00 per direct labor-hour $ 6.00 per machine-hour $ 80.00 per setup $ 200.00 per order $ 200.00 per shipment $ 6.00 per direct labor-hour Cost and activity data have been supplied for the following products: Direct materials cost per unit Direct labor cost per unit Number of units produced per year $ $ J78 2.50 5.00 4,000 B52 $34.00 $10.00 200 Total Expected Activity J78 B52 1,100 2,300 40 30 Direct labor-hours Machine-hours Machine setups Production orders Shipments Ž Required: Compute the unit product cost of each product listed above. (Do not round intermediate calculations. Round your answers to 2 decimal places.) J78 B52 Unit product cost

Answer 1

Lamer Corporation The unit product costs for the products are a combination of direct materials, direct labor, and overhead costs. The overhead costs assigned to each product would be computed as follows: J78 B52 Expected Expected Activity Amount Activity Amount Labor-related, at $10.00 per direct labor-hour 1100 11000 300 Machine-related, at $6.00 per machine-hour 2300 13800 240 Machine setups, at $80.00 per setup 480 160 Production orders, at $200.00 per order 600 400 Shipments, at $200.00 per shipment 1000 400 General factory, at $6.00 per direct labor-hour 1100 6600 180 Total overhead cost assigned (a) 33480 1680 Number of units produced (b) 4000 200 Overhead cost per unit (a) = (b) 8.37 8.4 The unit product costs combine direct materials, direct labor, and overhead costs as follows: 178 B52 34 Direct materials Direct labor Manufacturing overhead (see above) Unit product cost 8.4 52.4 5.87