Question

# Vanguard Corporation has provided the following data from its activity-based costing system: Activity Cost Pool Total...

Vanguard Corporation has provided the following data from its activity-based costing system:

 Activity Cost Pool Total Cost Total Activity Assembly \$ 1,127,280 77,000 machine-hours Processing orders \$ 91,065 1,950 orders Inspection \$ 141,570 1,980 inspection-hours

The company makes 430 units of product O37W a year, requiring a total of 660 machine-hours, 50 orders, and 10 inspection-hours per year. The product's direct materials cost is \$37.16 per unit and its direct labor cost is \$30.18 per unit.

According to the activity-based costing system, the average cost of product O37W is closest to:

\$95.24 per unit.

\$67.34 per unit.

\$96.90 per unit.

\$91.47 per unit.

Answer :- Calculation of the average cost of product O37W :-

Assembly = (\$1,127,280 / 77,000)*660 = \$9,662.4

Processing orders = (\$91,065/1,950)*50 = \$2,335

Inspection = (\$141,570 / 1,980)*10 = \$715

Direct material cost = \$37.16 * 430 = \$15,978.8

Direct labor cost = \$30.18 * 430 = \$12,977.4

Total cost of 470 units = \$9,662.4+\$2,335+\$715+\$15,978.8+\$12,977.4 = \$41,668.6

Average cost of product O37W = \$41,668.6 / 430 = \$96.90 per unit

So the correct answer is option C. ( \$96.90 per unit)

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