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 $7.00 per direct labor-hour
Machine-related $3.00 per machine-hour
Machine setups $40.00 per setup
Production orders $160.00 per order
Shipments $120.00 per shipment
General factory $4.00 per direct labor-hour

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

J78 B52
Direct materials cost per unit $6.50 $31.00
Direct labor cost per unit $3.75 $6.00
Number of units produced per year 4,000 100
Total Expected Activity J78 B52 Direct labor-hours 1,000 40
Machine-hours 3,200 30
Machine setups 5 1
Production orders 5 1
Shipments 10 1

Required:
Compute the unit product cost of each product listed above.

Answer 1

Answer:

J78= $15.95

B52= $45.4

Explanation:

First, we need to allocate overhead to each product:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

J78:

Labor-related= 7.00*1,000= 7,000

Machine-related= 3.00*3,200= 9,600

Machine setups= 40.00*5= 200

Production orders= 160.00*5= 800

Shipments= 120.00*10= 1,200

General factory= 4.00*1,000= 4,000

Total overhead= $22,800

Unitary overhead= 22,800/4,000= $5.7

B52:

Labor-related= 7.00*40= 280

Machine-related= 3.00*30= 90

Machine setups= 40.00*1= 40

Production orders= 160.00*1= 160

Shipments= 120.00*1= 120

General factory= 4.00*40= 160

Total overhead= $850

Unitary overhead= 850/100= $8.5

Now, we calculate the unitary production cost:

J78= 6.5 + 3.75 + 5.7= $15.95

B52= 31 + 6 + 8.5= $45.4