Question

Blanda Corporation has provided the following data from its activity-based costing system:
Activity Cost Pool Total Cost Total Activity

Assemly.... 612,560 31,000 machine hours

processing orders..... 35,451 1,300 orders

inspection........ 100,217 1,690 inspection-hours


Data concerning the company's product K54A appear below:
annual unit production and sales....... 410

annual machine hours...... 700

annual number of orders.... 30

anual inspection hours......... 30

direct materials cost..... 45.67 per unit

direct labor cost..... 31.24 per unit


3. According to the activity-based costing system, the average cost of product K54A is closest to:
A. $112.64 per unit
B. $114.99 per unit
C. $116.98 per unit
D. $76.91 per unit                                                                                                                                               

The activity rates for each activity cost pool are computed as follows:

Total Cost/Total Activity = Activity Rate

The overhead cost charged to Product K54A is:

Activity Rate x Activity = ABC Cost

Cost per unit = $_________ ¸ ______ units = $__________ per unit

Answer 1

Solution:

Determination of activity rate for each activity & allocation of overhead and overhead cost per unit - Blanda Corporation
Activity	Estimated Overhead Cost	Activity Base	Usage of Activity Base	Activity Rate	K54A
					Usage	Allocated Costs
Assembly	$612,560.00	Machine hours	31000	$19.76	700	$13,832.00
Processing orders	$35,451.00	Orders	1300	$27.27	30	$818.10
Inspection	$100,217.00	Inspection hours	1690	$59.30	30	$1,779.00
Total	$748,228.00					$16,429.10
Nos of units						410
Cost per unit						$40.07

Computation of unit product cost - K54A
Particulars	Per Unit
Direct material	$45.67
Direct labor	$31.24
Overhead	$40.07
Unit Product cost	$116.98

Hence option C is correct.