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 National's 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:

Answer 1

Ans.	Ans. Option 4th $16.28
	*Working notes:
	*Calculation of activity rate for Engineering and Design:
	Activity rate = Engineering and Design cost / Engineering and design hours
	$404,712 / 2,409
	$168 per engineering and design hour
	*Calculation of total overhead cost applied to High F Model:
	Overhead applied = Activity rate * Actual Engineering and Design hours of High F
	$168 * 969
	$162,792
	*Calculation of applied overhead cost per unit of High F :
	Engineering and Design Overhead per unit = Applied overhead cost / Sales units of High F
	$162,792 / 10,000
	$16.28 per unit