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 B is:
A) $12.00 per unit
B) $75.60 per unit
C) $70.00 per unit
D) $14.00 per unit
E) $13.40 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 B is:
A) $12.00 per unit 
B) $75.60 per unit 
C) $70.00 per unit 
D) $14.00 per unit 
E) $13.40 per unit

Quizplus · Accepted Answer

First, we need to calculate the overhead rate based on direct labor hours:
Overhead rate = Total overhead costs / Total direct labor hours
Overhead rate = $25,200 / (5 DLH + 15 DLH)
Overhead rate = $1,320 per DLH

Then, we can calculate the total cost per unit for Product B:
Total cost per unit = Direct materials cost + Direct labor cost + Overhead cost
Total cost per unit = $30 + ($20 x 2 DLH) + ($1,320 x 0.50 DLH)
Total cost per unit = $30 + $40 + $660
Total cost per unit = $730
Therefore, the total product cost per unit for Product B is $75.60 per unit (choice B).

The Homer Corporation Produces Two Products, and Reports the Following