Question

Waymire Ltd. currently uses a traditional costing system based on direct labour hours to allocate overhead....

Waymire Ltd. currently uses a traditional costing system based on direct labour hours to allocate overhead. This year, the company has budgeted to produce 1721 units of one of its products. Each unit requires 4 hours of direct labour. For the coming year, the company is considering changing to an activity based costing system by allocating overhead based on 3 activities. The following are the activities, budgeted total cost and cost drivers per activity for the upcoming year: Activity Cost driver Cost Cost Base Volume Processing machine hours $819691 22941 Maintenance direct labour hours $456114 122178 Inspection # of inspections $651502 31876 Waymire Ltd. has estimated the consumption of each of the activities for this product: 2040 machine hours and 2868 inspections. What is the product’s overhead cost per unit if Waymire decides to implement the activity-based costing system?

Select one:

a. $76.41

b. $63.10

c. $91.35

d. $80.15

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Answer #1

Option(C). $91.35 is the correct answer.

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