Question

5 Lazano, Inc., manufactures and sells two products: Product W4 and Product Z2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHS) required to produce that output appear below: Expected Total Direct Labor-Hours Direct Labor. Hours Per Unit 6.0 4.0 Production 500 400 Product W4 3,000 Product 22 Total direct labor-hours 4,600 The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Total 4.600 Activity Cost Product Pools Activity Measures Overhead Cost W4 Product 22 Labor-related DLHS $89,148 3,000 1,600 Product testing tests 45,680 400 600 Order size MHs 410,175 3,800 3,700 $545,003 1,000 7.500 The overhead applied to each unit of Product Z2 under activity-based costing is closest to (Round your intermediate calculations to 2 decimal places.) (2.05)) A S473.92 per unit

Answer 1

Computation of rate per each activity given as above

a. Labour related Overhead

Overhead per labour hour = $89148/4600 = $19.38

b. Production testing overhead

  Overhead rate per test = $45680/1000 = $45.68

c. Order size overheads based on machine hours

  Overhead rate per machine hour = $410175 / 7500 = $ 54.69

Computation of activity per unit of Z2

a. Dirrect labour hours per unit of Z2 = 1600 / 400 = 4 DLH's

b. Production test per unit of Z2 = 600 / 400 = 1.5 times

c. Machine hours per unit of Z2 = 3700 / 400 = 9.25

Computation of overhead cost of Product Z2 per unit

Direct Labour Cost - 4 DLH's * 19.38 = $77.52

Production testing cost - 1.5 tests * 45.68 = $ 68.52

Machine Overhead cost - 9.25 Hrs * 54.69 = $ 505.88

Total Cost per unit = $ 77.52 + $68.52 + $505.88 = $ 651.92 per unit of Z2