ProPats Hats Shirts Banners Direct Materials $5,000 $5,000 $5,000 Direct Labor $

Question

ProPats

Hats Shirts Banners
Direct Materials $5,000 $5,000 $5,000
Direct Labor $1,000 $1,000 $1,000



Activity Cost Pool Est. Annual cost Est. Activity cost Activity Cost

Supervision $600 3000 direct labor dollars $0.20 per dir labor
Inspection $400 10 inspections $40 per inspection
Depreciation $2,000 2000 machine hours $1 per machine hour


Hats Shirts Banners
Direct Labor $1,000 $1,000 $1,000
No. of Inspections 4 4 2
Machine hours 1000 500 500

I got $2 for each banner but it is telling me that it is not right? can some one explain this for me?

Explanation / Answer

Unit cost of a banner using the ABC Costing Activity based costing system: Hats Shirst Banners Direct materials $5,000 5,000 5,000 Direct Labor 1,000 1,000 1,000 Supervision$600 (3,000 direct labor $0.20 per 600 600 600 dir labor) Inspection $400 10 inspections $40 per inspection 400 400 400 Depreciation $2,000 2,000 machine hours $1 2,000 2,000 2,000 per machine hour Unit Cost per Banner Per unit Direct Material 5,000 Direct Labor 1,000 $2 1,000/500 Supervision 600 $0.20 Inspection 400 $80 (2*$40) Depreciation 2,000 $1 2,000/2000 Total $83.20

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