Question

National Inc. manufactures two models of CMD that can be used as cell phones, MPX, and digital camcorders. Model High F Great P Annual Sales in Units 10,000 16,000 National uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime costs of each product were as follows: Direct materials Direct labor High F $38.00 $17.52 Great P $25.40 $13.14 Budget factory overhead: Engineering and Design Quality Control Machinery Miscellaneous Overhead Total 2,409 engineering hours 12,848 inspection hours 33,726 machine hours 26,400 direct labor hours $ 404,712 269,808 539,616 134,904 $1,349,040 Nationals controller had been researching activity-based costing and decided to switch to it. A special study determined National's two products have the following budgeted activities: Engineering and design hours Quality control inspection hours Machine hours High F Great P 969 1,440 5,648 7,200 20, 286 13,440

Answer 1

Answer:

Option 1 is the correct answer. i.e $9.45

Explanation:

Activity Cost Pool	Overhead Costs	Total cost drivers	Activity Rate
Quality control	$           269,808	12,848	$               21.00	per inspection hour

	Great P
	Rate	Usage	Allocation
Quality control	$               21.00	7200	$           151,200
Number of units	16,000
Quality control factory overhead per unit ($151,200/16,000)	$                 9.45