Question

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 1

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)

If you have any query ask in comment section. If you like the answer plz rate. Thanks