Godwin Company has identified the following activities related to indirect production costs:
$$\begin{array} { l l l }
\text { Activity } & \text { Activity Costs } & \text { Cost Drivers } \
\text { Machine Setup } & \$ 180,000 & 1,500 \text { setup hours } \
\text { Materials Handling } & \$ 50,000 & 12,500 \text { pounds of materials } \
\text { Electric Power } & \$ 20,000 & 20,000 \text { kilowatt hours }
\end{array}$$
Godwin Company has obtained the following data concerning two products:
$\begin{array}{lll}&\text { Prodirct } A&\text { Prodirct } B\
\text { Number of units produced } & 4,000 & 20,000 \
\text { Direct materials cost } & \$ 20,000 & \$ 25,000 \
\text { Direct labor cost } & \$ 12,000 & \$ 20,000 \
\text { Number of setup hours } & 100 & 120 \
\text { Pounds of materials used } & 500 & 1,500 \
\text { Kilowatt-hours } & 1,000 & 2,000
\end{array}$
Using activity-based costing,what is the total production cost per unit for Product B?
A) $1.12 per unit
B) $2.25 per unit
C) $3.00 per unit
D) $3.37 per unit

Question

Godwin Company has identified the following activities related to indirect production costs:
$$\begin{array} { l l l } 
\text { Activity } & \text { Activity Costs } & \text { Cost Drivers } \
\text { Machine Setup } & \$ 180,000 & 1,500 \text { setup hours } \
\text { Materials Handling } & \$ 50,000 & 12,500 \text { pounds of materials } \
\text { Electric Power } & \$ 20,000 & 20,000 \text { kilowatt hours }
\end{array}$$
Godwin Company has obtained the following data concerning two products:
$\begin{array}{lll}&\text { Prodirct } A&\text { Prodirct } B\
\text { Number of units produced } & 4,000 & 20,000 \
\text { Direct materials cost } & \$ 20,000 & \$ 25,000 \
\text { Direct labor cost } & \$ 12,000 & \$ 20,000 \
\text { Number of setup hours } & 100 & 120 \
\text { Pounds of materials used } & 500 & 1,500 \
\text { Kilowatt-hours } & 1,000 & 2,000
\end{array}$
Using activity-based costing,what is the total production cost per unit for Product B?
A) $1.12 per unit
B) $2.25 per unit
C) $3.00 per unit
D) $3.37 per unit

Quizplus · Accepted Answer

To calculate the total production cost per unit for Product B using activity-based costing (ABC), we first need to allocate the indirect production costs to each product based on their respective cost drivers. Then, we add the direct costs to find the total production cost for Product B and divide by the number of units produced to find the cost per unit.1. **Machine Setup Cost Allocation:**   - Total Setup Cost: $180,000   - Total Setup Hours: 1,500 hours   - Cost per Setup Hour: $180,000 / 1,500 = $120 per hour   - Product B Setup Hours: 120 hours   - Product B Setup Cost: 120 hours * $120/hour = $14,4002. **Materials Handling Cost Allocation:**   - Total Materials Handling Cost: $50,000   - Total Pounds of Materials: 12,500 pounds   - Cost per Pound: $50,000 / 12,500 = $4 per pound   - Product B Pounds of Materials: 1,500 pounds   - Product B Materials Handling Cost: 1,500 pounds * $4/pound = $6,0003. **Electric Power Cost Allocation:**   - Total Electric Power Cost: $20,000   - Total Kilowatt Hours: 20,000 kWh   - Cost per Kilowatt Hour: $20,000 / 20,000 = $1 per kWh   - Product B Kilowatt Hours: 2,000 kWh   - Product B Electric Power Cost: 2,000 kWh * $1/kWh = $2,0004. **Total Indirect Costs for Product B:**   - Setup + Materials Handling + Electric Power = $14,400 + $6,000 + $2,000 = $22,4005. **Direct Costs for Product B:**   - Direct Materials: $25,000   - Direct Labor: $20,000   - Total Direct Costs: $25,000 + $20,000 = $45,0006. **Total Production Cost for Product B:**   - Direct Costs + Indirect Costs = $45,000 + $22,400 = $67,4007. **Total Production Cost Per Unit for Product B:**   - Total Cost / Number of Units = $67,400 / 20,000 units = $3.37 per unitTherefore, the total production cost per unit for Product B using activity-based costing is $3.37.

Godwin Company Has Identified the Following Activities Related to Indirect