Question

6. Sarah Corporation has provided the following data from its activity-based costing system: Activity Cost Pool Total Cost Total Activity Assembly .................. $387,000 25,000 machine-hours Processing orders ........ $68,510 1,700 orders Inspection $129,117 1,930 inspection-hours The company makes 240 units of product T91H a year, requiring a total of 550 machine-hours, 90 orders, and 40 inspection-hours per year. The product's direct materials cost is $16.98 per unit and its direct labor cost is $12.09 per unit. According to the activity-based costing system, the unit product cost of product T91H is closest to:

Answer 1

6. T91H
	$
DM	16.98
DL	12.09
Assembly cost	35.48
Processing order cost	15.1
Inspection cost	11.15
Total unit product cost	90.79 or 90.8

Working:

Assembly cost =

cost per machine hr = 387000/25000 = 15.48

cost per unit = 15.48*550 machine hrs / 240 no of units

= $35.48

Processing order cost =  

cost per order =  68510/1700 = 40.3

cost per unit = 40.3*90 orders / 240 no of units

= $15.1

Inspection cost =

cost per inspection hr = 129117/1930 = 66.9  

cost per unit =66.9* 40 inspection hr/ 240 no of units

= $11.15

7. P58Z
DM	34.78
DL	23.52
Assembly cost	49.93
Processing order cost	10.1
Inspection cost	5.1
Total unit product cost	123.43

Working:

Assembly cost =

cost per machine hr = 698950/35000 = 19.97

cost per unit = 19.97*1000 machine hrs / 400 no of units

= $49.93

Processing order cost =  

cost per order =  85101/1900 = 44.79

cost per unit = 44.79*90 orders / 400 no of units

= $10.1

Inspection cost =

cost per inspection hr = 129117/1930 = 66.9  

cost per unit =66.9* 30 inspection hr/ 400 no of units

= $5.1