ProPats Hats Shirts Banners Direct Materials $ 5,000 $ 5,000 $ 5,000 Direct Labo
ID: 2346017 • Letter: P
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
Calculate the unit cost of a banner.
Explanation / Answer
Calculate the unit cost of a banner.
Total direct labor cost = $1,000 + $1,000 + $1,000 = $3,000
Direct labor rate per unit = $3,000 / Total direct labor hour (shown against supervision cost) = $3,000 / 3,000 = $1.00 per unit.
No. of units (Banner) = $1,000 / $1 = 1,000 units
Total cost (Banner)
Direct materials $5,000
Direct labor $1,000
Factory overheads
Supervision $0.20 x 1,000 $200
Inspection $40 x 2 $80
Depreciation $1 x 500 $500
Total cost $6,780
No. of units 1,000
Unit cost $6,780 / 1,000 $6.78
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