Activity Based Costing Question No.5 (with answer)

A company manufactures two products, X and Y, using the same equipment and similar processes. Data for the production of these items in one period is shown below:

Data:

Quantity produced per period

X

Y

Material cost per unit

20,000

10,000

Direct labor hours per unit

$20

Machine hours per unit

½

Set-ups per period

4

Orders handled per period

70

Cost per direct labor hour

160

Overhead costs

$

Relating to machine activity

300,00

Relating to set-ups of production runs

50,000

Relating to handling of orders

70,000

Question: Using activity-based costing, what is the full production cost per unit X?

Answer:

$

$

a Machine hour driven costs 300,000/80,000 m/c hr 3.75
b Set-up driven costs 50,000/100 set ups 500 per set up
c Order driven costs 70,000/200 orders 350 per order
Overhead costs of X

$

Machine driven costs(40,000x$3.75)

150,000

Set-ups(30 x$500)

15,000

Orders handled(40x$350)

14,000

179,000

Units produced

20,000

Overhead cost per unit

$8.95

Full cost per unit ($5+$4+$8.95)

$17.95

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