Platinum Company manufactures several different products and uses an activity-based costing system. Information from its system for the year for all products follows: The annual production and sales of one of its products, the Zinger, are 1000 units. The following data relate to the production and sales of Zingers in the most recent year:
What is the average cost of one Zinger? (Round all answers to two decimal places.)
A)$17.48
B)$170.90
C)$232.16
D)$200.68

Question

Platinum Company manufactures several different products and uses an activity-based costing system. Information from its system for the year for all products follows:  The annual production and sales of one of its products, the Zinger, are 1000 units. The following data relate to the production and sales of Zingers in the most recent year:
 What is the average cost of one Zinger? (Round all answers to two decimal places.)
A)$17.48 
B)$170.90 
C)$232.16 
D)$200.68

Quizplus · Accepted Answer

Using the activity-based costing system, the total cost of producing and selling 1000 Zingers is calculated as follows:
Activity Cost Pool Total Cost Total Activity Rate
Activity 1: Setup $17,000 50 setups $340 per setup
Activity 2: Materials Handling 12,500 330 moves 37.88 per move
Activity 3: Machining 26,250 3,500 machine-hours 7.5 per machine-hour
Activity 4: Quality Control 5,625 125 inspections 45 per inspection
Activity 5: Other Overhead 27,500 1,000 direct labor-hours 27.5 per DLH
Total cost $88,875
The cost per Zinger is therefore:
$88,875 / 1000 units = $88.88 per unit
Adding the cost of the direct materials ($60.80) and the direct labor ($51.00) for one unit of Zinger, we get:
$88.88 + $60.80 + $51.00 = $200.68
Therefore, the average cost of one Zinger is $200.68.

Platinum Company Manufactures Several Different Products and Uses an Activity-Based