Question

Crimin, inc manufactures and sells two products: V7 and Y2. Data concerning the expected production of each product and the expected total direct labor hours required to prodece that output appear below:   

Expected production direct labor hours per unit total direct labor hours

product V7 700 5.0 3,500   

product Y2 700 4.0 2,800

total direct labor hours 6,300

The direct labor rate is $19.80 per DLH. The direct materials cost per unit for each product is given below:

DIRECT MATERIALS COST PER UNIT PRODUCT V7 $208.90

PRODUCT Y2 $297.60

The company is considering adopting an activity based costing system with the following activity cost pools, activity measures, and expected activity

expected activity

activity cost pools activity measures estimated overhead cost product V7 product Y2 total

labor related DLHs $154,350 3,500 2,800 6,300

Machine setups setups 114,595 600 700 1,300

order size MHS 292,544 3,100 3,300 6,400

$561,489

The unit product cost of product V7 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor hours is closest to:

  

Answer 1

Calculate unit product cost under traditional costing

Overhead rate = 561489/6300 = 89.13 per labour hour

Calculate unit cost

	Product V7
Overhead cost per unit	311938/700 = 445.63
Direct labour cost per unit	3500*19.80/700 = 99
Direct material per unit	208.90
Unit product cost	753.53

The unit product cost of product V7 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor hours is closest to: $753.53