Asked by Dathan Trejo on May 05, 2024
Verified
The overhead cost per unit of Product B under the activity-based costing system is closest to
A) $26.09.
B) $38.16.
C) $35.28.
D) $50.66.
External Reports
Financial documents that are prepared for parties outside the organization, such as shareholders and creditors.
Overhead Cost
Refers to ongoing expenses that are not directly tied to production but are necessary for running the business, such as rent, utilities, and insurance.
Direct Labour-Hours
A measure of the total time individuals spend working directly on manufacturing a product.
- Calculate activity indices and assign overhead costs to products following the Activity-Based Costing methodology.
- Compute unit costs under ABC and traditional costing systems.
Verified Answer
EJ
EDGAR J RIVERA-RIVERAMay 11, 2024
Final Answer :
B
Explanation :
The overhead cost per unit of Product B under the activity-based costing system is calculated by first allocating the overhead costs from each activity cost pool based on the activity levels for Product B, then dividing by the number of units of Product B.1. Activity 1: $30,528×6001,600=$11,448\$30,528 \times \frac{600}{1,600} = \$11,448$30,528×1,600600=$11,448 2. Activity 2: $17,385×2001,900=$1,831\$17,385 \times \frac{200}{1,900} = \$1,831$17,385×1,900200=$1,831 3. General Factory: $50,872×6601,170=$28,887\$50,872 \times \frac{660}{1,170} = \$28,887$50,872×1,170660=$28,887 Total overhead cost for Product B = \$11,448 + \$1,831 + \$28,887 = \$42,166Overhead cost per unit of Product B = $42,166÷1,100units=$38.33\$42,166 \div 1,100 units = \$38.33$42,166÷1,100units=$38.33 The closest option provided is $38.16, so the correct answer is B.
Learning Objectives
- Calculate activity indices and assign overhead costs to products following the Activity-Based Costing methodology.
- Compute unit costs under ABC and traditional costing systems.