Question

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	Activity Rates
Labor-related	$	7.00	per direct labor-hour
Machine-related	$	3.00	per machine-hour
Machine setups	$	40.00	per setup
Production orders	$	160.00	per order
Shipments	$	120.00	per shipment
General factory	$	4.00	per direct labor-hour

Cost and activity data have been supplied for the following products:

	J78				B52
Direct materials cost per unit	$	6.50			$	31.00
Direct labor cost per unit	$	3.75			$	6.00
Number of units produced per year		4,000				100

	Total Expected Activity
		J78			B52
Direct labor-hours		1,000			40
Machine-hours		3,200			30
Machine setups		5			1
Production orders		5			1
Shipments		10			1

Required:

Compute the unit product cost of each product listed above. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Unit Product Cost:

J78:

B52:

Answer 1

Solution

	Cost per Unit
Product J78	$                  15.95
Product B52	$                  45.50

Working

ABC Costing
	Product J78	Product B52
Direct material	$                    6.50	$                     31.00
Direct labor	$                    3.75	$                        6.00
Overheads	$                    5.70	$                        8.50
Total Cost per unit	$                  15.95	$                     45.50

.

Cost assigned to Product B52
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Labor-related	$             7.00	40	$ 280
Machine-related	$             3.00	30	$ 90
Machine setups	$           40.00	1	$ 40
Production orders	$        160.00	1	$ 160
Shipments	$        120.00	1	$ 120
General factory	$             4.00	40	$ 160
Total Overheads assigned			$                   850.00
Production			100.00
Overhead cost per unit			$                 8.50

.

Cost assigned to Product J78
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Labor-related	$             7.00	1,000.00	$ 7,000.00
Machine-related	$             3.00	3,200.00	$ 9,600.00
Machine setups	$           40.00	5.00	$ 200.00
Production orders	$        160.00	5.00	$ 800.00
Shipments	$        120.00	10.00	$ 1,200.00
General factory	$             4.00	1,000.00	$ 4,000.00
Total Overheads assigned			$ 22,800.00
Production			4,000.00
Overhead cost per unit			$ 5.70