Paparo Corporation has provided the following data from its activity-based costi

Question

Paparo Corporation has provided the following data from its activity-based costing system Total Cost Activity Cost Pool Assembly Processing orders Inspection Total Activity $ 846,040 52,000 machine-hours 64,056 1,700 orders 102,408 1,360 inspection-hours Data concerning the company's product Q79Y appear below: Annual unit production and sales Annual machine-hours Annual number of orders Annual inspection hours Direct materials cost Direct labor cost 450 1,080 70 20 $44.00 per unit $41.03 per unit According to the activity-based costing system, the average cost of product Q79Y is closest to

Explanation / Answer

Ans.        Average cost of Product Q79Y = 133.29 Activity cost pool Total cost Total Activity Activity rate Assembly 846040 52000 machine-hours 16.27 per machine-hour Processing Orders 64056 1700 orders 37.68 per order Inspection 102408 1360 inspection-hours 75.30 per inspection-hour Average cost of product Q79Y: Direct materials 44 Direct labor 41.03 Assembly [(16.27 * 1080) /450] 39.05 Processing orders [(37.68 * 70) / 450] 5.86 Inspection [(75.30 * 20) / 450] 3.35 133.29 *Calculaiton related to average cost of product: Assembly (Activity Rate * Machine hours) / Unit production and sales Processing orders (Activity Rate * no. of orders) / Unit production and sales Inspection (Activity Rate * Inspection hours) / Unit production and sales

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