Question

Larner Corporation is a diversified manufacturer of industrial goods. The company's activity-based costing system contains the following six activity cost pools and activity rates:
Activity Cost Pool Activity Rates
Labor-related $9.00 per direct labor-hour
Machine-related $7.00 per machine-hour
Machine setups $60.00 per setup
Production orders $200.00 per order
Shipments $100.00 per shipment
General factory $7.00 per direct labor-hour

Cost and activity data have been supplied for the following products:

J78 B52
Direct materials cost per unit $3.00 $36.00
Direct labor cost per unit $5.00 $7.00
Number of units produced per year 4,000 200

Total Expected Activity
J78 B52
Direct labor-hours 800 40
Machine-hours 3,300 20
Machine setups 3 3
Production orders 8 3
Shipments 12 3

Required:
Compute the unit product cost of each product listed above. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Answer 1

Answer:

Larner Corporation

Unit cost of          J78                    B52

                     $17.72                   $52.30

Explanation:

a) Data and Calculations:

Activity Cost Pool Activity Rates

Labor-related $9.00 per direct labor-hour

Machine-related $7.00 per machine-hour

Machine setups $60.00 per setup

Production orders $200.00 per order

Shipments $100.00 per shipment

General factory $7.00 per direct labor-hour

b) Cost and activity data have been supplied for the following products:

                                                                   J78                    B52

                                                              Unit  Total          Unit          Total

Direct materials cost per unit            $3.00  $12,000   $36.00      $7,200

Direct labor cost per unit                   $5.00 $20,000   $7.00        $1,400

Manufacturing overhead costs                     $38,880                    $1,860

c) Total manufacturing costs                        $70,880                  $10,460

Number of units produced per year               4,000                       200

d) Unit cost                                                      $17.72                   $52.30

e) Total Expected Activity  and Costs:

                                       J78                          B52

                               Unit       Total          Unit        Total

Direct labor-hours   800  $7,200           40         $360

Machine-hours     3,300  23,100            20            140

Machine setups           3       180               3            180

Production orders       8    1,600               3           600

Shipments                  12    1,200               3          300

General factory      800    5,600            40          280

 Total overhead           $38,880                      $1,860