Asked by Clara J. Gomez on Jun 20, 2024
Verified
The overhead applied to each unit of Product G1 under activity-based costing is closest to:
A) $780.12 per unit
B) $866.76 per unit
C) $830.79 per unit
D) $380.33 per unit
Activity-Based Costing
A costing methodology that assigns overhead and indirect costs to specific products or services based on the activities that contribute to these costs.
Overhead
The indirect costs of running a business that cannot be directly linked to a specific product or service, such as utilities, rent, and administrative expenses.
- Work out and contrast the expenses for unit products under traditional versus activity-based costing.
- Analyze the difference in overhead allocation between traditional costing and ABC.
Verified Answer
JS
jakub szadyJun 21, 2024
Final Answer :
C
Explanation :
The overhead cost for each activity is calculated as follows:
- Activity 1: $345,000 / 1,500 = $230 per setup
- Activity 2: $375,000 / 12,500 = $30 per machine hour
- Activity 3: $480,000 / 20,000 = $24 per inspection
- Activity 4: $590,000 / 40,000 = $14.75 per order
Total overhead cost per unit of G1 = ($230 + $30 x 6 + $24 + $14.75 x 3) / 1,000 = $0.83 per unit
Therefore, the closest option is C, which is $830.79 per unit.
- Activity 1: $345,000 / 1,500 = $230 per setup
- Activity 2: $375,000 / 12,500 = $30 per machine hour
- Activity 3: $480,000 / 20,000 = $24 per inspection
- Activity 4: $590,000 / 40,000 = $14.75 per order
Total overhead cost per unit of G1 = ($230 + $30 x 6 + $24 + $14.75 x 3) / 1,000 = $0.83 per unit
Therefore, the closest option is C, which is $830.79 per unit.
Explanation :
Computation of activity rates: 
Computation of the overhead cost per unit under activity-based costing. 
Essay
Computation of the overhead cost per unit under activity-based costing. Essay
Learning Objectives
- Work out and contrast the expenses for unit products under traditional versus activity-based costing.
- Analyze the difference in overhead allocation between traditional costing and ABC.