Question

Mahaley, Inc., manufactures and sells two products: Product Q9 and Product F0. 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 Q9 880 8.8 7,744 Product F0 880 6.8 5,984 Total direct labor-hours 13,728 The direct labor rate is $22.60 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product Q9 $175.70 Product F0 $147.50 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 Q9 Product F0 Total Labor-related DLHs $ 387,680 7,744 5,984 13,728 Machine setups setups 47,830 700 600 1,300 Order size MHs 288,700 3,900 3,700 7,600 $ 724,210 The unit product cost of Product F0 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.)

Answer 1

Answer:

Cost per unit of F0 = $524.34 under activity based costing

Explanation:

Provided data for activity based costing

Activity                    Cost                  Product F0      Total

Labor                    $387,680            5,984              13,728

Machine Setup     $47,830              600                 1,300

Order Size            $288,700            3,700              7,600

Total                      $724,210

Provided Direct Material cost = $147.50 X 880 units = $129,800

Labor = $\frac{387,680}{13,728} \times 5,984 = 168,988.72$

Machine Setup = $\frac{47,830}{1,300} \times 600 = 22,075.38$

Order Size = $\frac{288,700}{7,600} \times 3,700 = 140,551.32$

Total cost = $129,800 + $168,988.72 + $22,075.38 + $140,551.32 = $461,415.42

Total units = 880

Cost per unit = $\frac{total cost}{total units} = \frac{461,415.42}{880} = 524.336$

Cost per unit of F0 = $524.34 under activity based costing