Question

Sunshine Company only produced one product and has the following costs:

Number of units produced each year.......................	6,400
Variable costs per unit:
Direct Materials...............................................	$ 90
Direct Labor...................................................	$ 43
Variable Manufacturing Overhead......................	$ 4
Variable Selling & Administrative expenses..........	$ 6
Fixed costs per year:
Fixed Manufacturing Overhead..........................	$ 50,000
Fixed Selling & Administrative expenses.............	$ 150,000

Compute the UNIT product cost under variable costing. Show your work!

Someday Mine uses the following activity rates from its activity-based costing to assign overhead costs to products.

ACTIVITY COST POOLS	ACTIVITY RATE
Setting up batches	$ 54.50 per batch
Assembling products	$ 6.00 per assembly hour
Processing customer orders	$ 34.00 per customer order

Data concerning two products appear below:

	Product A	Product B
Number of batches	26	31
Number of assembly hours	550	400
Number of customer orders	32	25

How much overhead cost would be assigned to Product A using the company's activity-based costing system? Show your work!

Answer 1

Question 1

Solution

Cost per unit = $137

Working

Variable costing Unit Product cost
Direct material	$              90
Direct labor	$              43
Variable Manufacturing overhead	$                 4
Variable costing unit product cost	$            137

Question 2

Solution

Overhead to be assigned to Product A = $5,805

Working

Cost assigned to Product A
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Setting up batches	$           54.50	26.00	$ 1,417.00
Assembling products	$             6.00	550.00	$ 3,300.00
Processing customer orders	$           34.00	32.00	$ 1,088.00
Total Overheads assigned			$               5,805.00