Pro Pats is a company that manufactures three souvenir products and ahs the foll

ID: 2348383 • Letter: P

Question

Pro Pats is a company that manufactures three souvenir products and ahs the following direct costs for producing three 1,000-unit batches, one for each product.

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

Banners

Direct Materials

5000

Direct Labor

1000

Supervision

200

($0.20 per direct labor dollar times 1000 direct labor dollars)

Inspections

$40 per inspection times 2 inspections

Depreciation

500

$1 per machine hour times 500 machine hours

Total

6780

Unit cost

6.78

Total cost of 6780 dividend by number of units, 1000