Question

The Homer Corporation produces two products, and reports the following production and cost information for the most recent accounting period.

	Product A				Product B
Number of units produced		17,000	units			3,500	units
Direct labor @ $20 per direct labor hour (DLH)		0.50	DLH per unit			2.00	DLH per unit
Direct materials cost	$	2	per unit		$	32	per unit

Overhead costs:	Total Cost				Activity Driver	Product A		Product B
Machine setup	$	2,700.00			setups	5	setups	20	setups
Quality inspections		43,800.00			inspections	80	inspections	170	inspections
Total	$	46,500.00

Using direct labor hours as the basis for assigning overhead costs, the total product cost per unit for Product B is:

Multiple Choice

$12.00 per unit

$13.50 per unit

$72.00 per unit

$78.00 per unit

$14.00 per unit

Answer 1

Total Direct Labor Hours = (0.50 DLH per unit * 17,000 Units)+ (2.00 DLH per unit * 3,500 Units)

= 15,500 Direct Labor Hours

Direct Labor Cost = 2.00 DLH per unit * $ 20 per direct labor hour * 3,500 Units

= $ 140,000

Direct materials Cost = $ 32 Per Unit * 3,500 Units

= $ 112,000

Manufatcuring Overhead = $ 46,500.00 / Total Direct Labor Hours * Total Direct Labor Hours of B

= $ 46,500 / 15,500 Direct Labor Hours * 7,000Direct Labor Hours

= $ 21,000

Total Product Cost = $ 140,000+ $ 112,000+$ 21,000

= $ 273,000

Total Product Cost Per Unit = Total Product Cost / Units

= $ 273,000 / 3,500 Units

= $ 78.00 Per Unit

Hence the correct answer is $ 78.00 Per Unit