Business, 25.02.2020 22:28 mcclendoncassandra

Houseal Corporation has provided the following data from its activity-based costing system:

Activity Cost Pool Total Cost Total Activity
Assembly $ 613,250 55,000 machine-hours
Processing orders $ 46,170 1,500 orders
Inspection $ 146,110 1,900 inspection-hours

Data concerning one of the company's products, Product W58B, appear below:

Selling price per unit $ 113.70
Direct materials cost per unit $ 48.14
Direct labor cost per unit $ 11.62
Annual unit production and sales 360
Annual machine-hours 1,040
Annual orders 60
Annual inspection-hours 30

According to the activity-based costing system, the product margin for product W58B is:

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Answer from: kargarzadehsm

Product margin per unit= $10.19

Explanation:

Giving the following information:

Activity Cost Pool Total Cost Total Activity

Assembly $ 613,250 55,000 machine-hours

Processing orders $ 46,170 1,500 orders

Inspection $ 146,110 1,900 inspection-hours

First, we need to calculate the estimated overhead rate for each activity cost pool:

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Assembly= 613,250/55,000= $11.15 per machine hour

Processing= 46,170/1,500= $30.78 per order

Inspection= 146,110/1,900= $76.9 per inspection hour

We will calculate the total cost of production and then the unitary cost to determine the product margin:

Total cost= direct material + direct labor + allocated overhead

Selling price per unit $ 113.70

Direct materials cost per unit $ 48.14

Direct labor cost per unit $ 11.62

Annual unit production and sales 360

Annual machine-hours 1,040

Annual orders 60

Annual inspection-hours 30

Total cost= 48.14*360 + 11.62*360 + (1,040*11.15 + 60*30.78 + 30*76.9)= 37,263.4

Unitary cost= 37,263.4/360= 103.51

Product margin= selling price - unitary cost= 113.70 - 103.51= $10.19

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Houseal Corporation has provided the following data from its activity-based costing system:

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