The Homer Corporation produces two products, and reports the following production and cost information for the most recent accounting period.

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Using direct labor hours as the basis for assigning overhead costs, the total product cost per unit for Product A is:
A) $12.00 per unit
B) $13.40 per unit
C) $70.00 per unit
D) $14.00 per unit
E) $75.60 per unit

Question

The Homer Corporation produces two products, and reports the following production and cost information for the most recent accounting period.

-
Using direct labor hours as the basis for assigning overhead costs, the total product cost per unit for Product A is:
A) $12.00 per unit 
B) $13.40 per unit 
C) $70.00 per unit 
D) $14.00 per unit 
E) $75.60 per unit

Quizplus · Accepted Answer

To calculate the total product cost per unit for Product A, we need to consider direct materials cost, direct labor cost, and overhead cost.

Direct materials cost per unit for Product A = $2 
Direct labor cost per unit for Product A = 0.5 DLH x $20 per DLH = $10

To allocate the overhead costs, we need to calculate the overhead rate per direct labor hour (DLH).

Total overhead costs / Total DLH = $25,200 / 300 DLH = $84 per DLH

Now, we can allocate the overhead costs to each product using their respective direct labor hours.

Overhead cost for Product A = 2 DLH x $84 per DLH = $168 
Total product cost per unit for Product A = $2 + $10 + $168 = $180

Therefore, the total product cost per unit for Product A is $13.40 per unit.

The Homer Corporation Produces Two Products, and Reports the Following