Question

Olmo, Inc., manufactures and sells two products: Product K0 and Product H9. The annual production and sales of Product of K0 is 600 units and of Product H9 is 600 units. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product K0 Product H9 Total Labor-related DLHs $ 550,908 3,600 1,800 5,400 Production orders orders 53,919 700 400 1,100 Order size MHs 836,516 4,000 3,100 7,100 $ 1,441,343 The overhead applied to each unit of Product K0 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.)

Answer 1

Answer:

The overhead applied cost per unit in Product KO = $1,577.18

Explanation:

Step 1 : Calculate PreDetermined Overheard Rate (POR) per Activity cost pool

POR = estimated overheard cost/ total of basis

          Labor = $550,908/5,400 = $122.42

 Production =$53,919/1,100 =$49,02

        Order  =$836,516/7,100=$117.82

Step 2 : Multiply each POR to the usage of product KO on each of the cost pool activity

  Labor= $122.42 *3600 = $440,712

Production = $49.02 *700 = $34,314

Order  = $117.82 * 4,000 = $471,280

Total Cost Product KO = $946,306

Step 3 : Divide the total cost by units produced

per unit =$946,306 /600 units

             = $1,577.18