Question

Fleurant, Inc., manufactures and sells two products: Product W2 and Product P8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:

	Expected Production	Direct Labor-Hours Per Unit	Total Direct Labor-Hours
Product W2	300	6	1,800
Product P8	600	3	1,800
Total direct labor-hours			3,600

The direct labor rate is $30.10 per DLH. The direct materials cost per unit is $196.60 for Product W2 and $133.30 for Product P8.

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

		Estimated		Expected Activity
Activity Cost Pools	Activity Measures	Overhead Cost		Product W2	Product P8	Total
Labor-related	DLHs	$	211,576	1,800	1,800	3,600
Production orders	orders		17,838	410	310	720
Order size	MHs		238,586	3,810	3,610	7,420
		$	468,000

The overhead applied to each unit of Product W2 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.)

rev: 03_25_2018_QC_CS-119201

Multiple Choice

• $643.69 per unit

• $794.79 per unit

• $780.00 per unit

• $408.31 per unit

Answer 1

Solution:

Computation of Activity rates
Activity Cost Pool	Total Cost	Total Activity	Activity rate
Labor related	$2,11,576	3600	$58.77	per DLH
production orders	$17,838	720	$24.78	per order
Order size	$2,38,586	7420	$32.15	per MH
Computation of Overhead allocated to per unit of Product W2
Activity Cost Pool	Activity rate	Activity usage by W2	Overhead assigned
Machine related	$58.77	per DLH	1800	$1,05,786
Batch Setup	$24.78	per order	410	$10,160
Order size	$32.15	per MH	3810	$1,22,492
Total Overhead allocated to Product W2	$2,38,437
/units of W2	300
Total Overhead allocated to each unit of Product W2	$794.79

Hence, second option is correct.