Question

Fleurant, Inc., manufactures and sells two products: Product W2 and Product P8. Data concerning the expected...

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

Homework Answers

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.

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