Question

Exercise 4-3 Compute ABC Product Costs [LO4-3] Larner Corporation is a diversified manufacturer of industrial goods....

Exercise 4-3 Compute ABC Product Costs [LO4-3]

Larner Corporation is a diversified manufacturer of industrial goods. The company's activity-based costing system contains the following six activity cost pools and activity rates:

Activity Cost Pool Activity Rates
Labor-related $ 7.00 per direct labor-hour
Machine-related $ 4.00 per machine-hour
Machine setups $ 50.00 per setup
Production orders $ 100.00 per order
Shipments $ 150.00 per shipment
General factory $ 4.00 per direct labor-hour

  

Cost and activity data have been supplied for the following products:

  

J78 B52
Direct materials cost per unit $ 3.00 $ 20.00
Direct labor cost per unit $ 3.00 $ 6.00
Number of units produced per year 2,000 100
Total Expected
Activity
J78 B52
Direct labor-hours 1,000 20
Machine-hours 2,000 50
Machine setups 6 3
Production orders 5 3
Shipments 8 3

Required:

Compute the unit product cost of each product listed above.(Do not round intermediate calculations. Round your answers to 2 decimal places.)

Homework Answers

Answer #1

Answer :

Computation of Unit product cost

J78 B52
Direct Material $ 3 $ 20
Direct Labor $ 3 $ 6
Overhead assigned $ 10.50 $ 13.20
Unit product cost $ 16.50 $ 39.20

Working note -1

Computation of overhead cost per unit under ABC Costing

J 78 B 52
Overhead cost ( Activity rate * Total expected Activity) ( Activity rate * Total expected Activity)
Labor related

$ 7000

( $ 7 *1000)

$ 140

( $ 7 * 20)

Machine related

$ 8000

( $ 4 *2000)

$ 200

( $ 4 *50)

Machine set up

$ 300

( $ 50*6)

$ 150

( $ 50*3)

Production order

$ 500

( $ 100 *5)

$ 300

( 100*3)

Shipment

$ 1200

( 150*8)

$ 450

( 150*3)

General Factory

$ 4000

( $ 4*1000)

$ 80

( $ 4*20)

Total overhead cost (a) $ 21000 $ 1320
Number of unit produced (b) 2000 100
Overhead assigned per unit (a) / (b) $ 10.50 $ 13.20
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