Question

Paparo Corporation has provided the following data from its activity-based costing system:

Activity Cost Pool	Total Cost		Total Activity
Assembly	$	813,600	48,000	machine-hours
Processing orders	$	65,195	1,700	orders
Inspection	$	110,592	1,440	inspection-hours

Data concerning the company's product Q79Y appear below:

Annual unit production and sales		550
Annual machine-hours		1,140
Annual number of orders		120
Annual inspection hours		25
Direct materials cost	$	43.00	per unit
Direct labor cost	$	41.33	per unit

According to the activity-based costing system, the average cost of product Q79Y is closest to:

Answer 1

ANSWER

Activity Cost Pool	Total Cost[a]	Total Activity[b]	Activity Rate [a/b]
Assembly	$813,600	48,000 machine-hours	16.95
machine-hour
Processing Orders	65,195	1,700 orders	$38.35 per order
Inspection	110,592	1,440 inspection-hours	$76.8 per inspection-hour

Average Cost of Product Q79Y:
Direct materials	$43.00
Direct labor	41.33
Assembly [($16.95 × 1,140) ÷ 550]	35.13
Processing orders [($38.35 × 120) ÷ 550]	8.37
Inspection [($76.8× 25) ÷ 550]	3.49
	$131.32