Salvatori, Inc., manufactures and sells two products: Product A4 and Product Q5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product A4 550 6.5 3,575 Product Q5 850 3.5 2,975 Total direct labor-hours 6,550 The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product A4 Product Q5 Total Labor-related DLHs $ 160,558 3,575 2,975 6,550 Machine setups setups 8,050 550 450 1,000 Order size MHs 497,027 3,700 4,000 7,700 $ 665,635 The overhead applied to each unit of Product A4 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) rev: 03_25_2018_QC_CS-119201

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Answer:

Cost per unit of overhead = $330,891.46/550 = $601.62

Explanation:

Total units produced of A4 = 550

Activity                    Total cost          Activity rate of A4          Total Activity

Labor Related         $160,558             3,575 DLH                       6,550 DLH

Machine Setup        $8,050                 550 Setups                     1,000 Setups

Order Size               $497,027              3,700 MHs                      7,700 MHs

Total                         $665,635

Overhead applied to Product A4

Labor = [tex]\frac{160,558}{6,550} \times 3,575 = 87,632.80[/tex]

Machine Setup = [tex]\frac{8,050}{1,000} \times 550 = 4,427.5[/tex]

Order Size = [tex]\frac{497,027}{7,700} \times 3,700 = 238,831.16[/tex]

Total Cost for 550 units = $87,632.80 + $4,427.5 + $238,831.16 = $330,891.46

Cost per unit of overhead = $330,891.46/550 = $601.62

The Overhead applied to Product A4 is on the labor $87,632.80, machine setup $4,427.5, and order size cost is $601.62, and the list of costs is given in the image below.

What is the overhead?

Overhead is also called an overhead expense. It means the current cost of operating a business. Overheads are outlay that cannot be handily analyzed or determined with any specific revenue unit, unlike operating expenses such as raw material and labor.

Overhead applied to Product A4 are:

Labor:

[tex]\text{Labor} = \dfrac{\text{Labor related cost}}{\text{Total Coat}}\times\text{Activity Rate}\\\\\\\text{Labor}= \dfrac{\$1,60,558}{\$6,550}\times3,575\\\\\\\text{Labor} =\$87,632.80[/tex]

Machine set up:

[tex]\text{Machine Setup} =\dfrac{\text{Machine Set up cost}}{\text{Total Activity}} \times\text{Activity Rate Setups}\\\\\\\text{Machine Setup} =\dfrac{\$8,050}{\$,1000}\times550\\\\\\\text{Machine Setup} =\$4,427.5[/tex]

Order Size Cost:

[tex]\text{Order Size} =\dfrac{\text{Order Size Cost}}{\text{Total Activity}} \times\text{Activity Rate of A4}\\\\\\\text{Order Size} =\frac{\$4,97,027}{\$7,700}\times3,700\\\\\\\text{Order Size} = 2,38,831.16[/tex]

Then, Total Cost for 550 units would be:

[tex]\text{Total Cost for 550 units} = \$87,632.80 +\ $4,427.5 + \$238,831.16\\\\\\\text{Total Cost for 550 units} = \$330,891.46[/tex]

Then the cost of Per unit overhead would be:

[tex]\text{Cost per unit of overhead} = \frac{\$330,891.46}{550}\\\\\text{Cost per unit of overhead} = \$601.62[/tex]

Therefore, The cost per unit overhead would be $301.62.

To learn more about the overheads, refer to:

https://brainly.com/question/180050

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