Using the activity-based costing rates, (Round per unit answers to 2 decimal pla

Question

Using the activity-based costing rates,

(Round per unit answers to 2 decimal places, e.g. 15.25)

Jay Krue makes two products, Simple and Complex. As their names suggest, Simple is the more basic product, and Complex comes with all the bells and whistles. The company has always allocated overhead costs to products based on machine hours. Last year, the company implemented an activity-based costing system, and managers determined the following activity pools and rates based on total overhead of $1,408,000:
Rate Assembly $1.25 per direct labor hour Fabrication $9.75 per machine hour Setups $18 per batch Bonding $85,200 direct to Complex
Only the Complex product requires bonding, so all the costs of bonding should be allocated to Complex. The following data relate to both products.
Simple Complex Units produced 127,000 50,000 Direct labor hours 231,000 101,000 Machine hours 50,000 30,000 Batches 2,300 4,800

Explanation / Answer

Simple Complex Simple Complex Total Overhead C D Units produced 127,000 50,000 A(C*Rate) B(D*Rate) A+B $1.25 per direct labor hour Assembly Direct labor hours 231,000 101,000 288750 126250 415000 $9.75 per machine hour Fabrication Machine hours 50,000 30,000 487500 292500 780000 $18 per batch Setups Batches 2,300 4,800 41400 86400 127800 $85,200 direct to Complex Bonding 85200 85200 Total E 817650 590350 1408000 Units produced F 127,000 50,000 Unit/Cost(E/F) 6.438189 11.807

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