EASC manufactures large paint brushes and small paint brushes. Per unit cost dat
ID: 2562313 • Letter: E
Question
EASC manufactures large paint brushes and small paint brushes. Per unit cost data us as follows.
Direct materials
The direct labor wage is $20 per hour.
EASC has just convrted to an Activity Based Costing Systm to apply overhead to lare and small paint brushes. At the beginning of the year, the following Activity Costs Pools and Activity Measures were identified:
Purchase Orders
EASC annuall produces 80,000 large paint burshes and 70,000 small paint brushes.
Assuming that actual activity is the same as expected activity, what is the unit product cost of large paint brushes ( round to the nearest 2 decimal places) ?
A. $28.13
B. $28.50
C. $27.44
D. $33.75
E. $22.50
Large SmallDirect materials
$1.50 $1.00 Direct Labor $20.00 $15.00Explanation / Answer
Calculate total overhead costs assigned to large as follows:
Total overhead costs assigned to large = $395,000
Number of units of large produced = 80,000
Therefore,
Overhead cost per unit of large = $395,000/80,000 = $4.94
Now calculate the total product cost per unit for large as follows:
Total product cost per unit for large
= Direct materials cost + Direct labor cost + Overhead costs assigned
= $1.50 + $20 + $4.94
= $26.44
The correct answer is $26.44.
Activity Cost Pool Estimated Overhead Expected Activity Activity rate Expected Acivity for Large Overhead assigned to large (A) (B) (C = A/B) (D) (C x D) Purchase Orders $150,000 300 $500 100 $50,000 Machine Set Ups $300,000 10,000 $30 4,000 $120,000 General Factory $450,000 50,000 $9 25,000 $225,000 Total overhead assigned to large $395,000Related Questions
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