Exhibit 17-2 BigView Monitors manufactures three different sizes of computer monitors: 15-inch, 17-inch, and 20-inch. The company has recently implemented an activity-based costing system. BigView has identified five different production activities as well as the best cost driver for each activity. Each activity and driver is listed below, along with the budgeted amount that is associated with each activity for next year.
The following information relates to each size of monitor and next year's anticipated manufacturing operations:

- Refer to Exhibit 17-2. Under an activity-based product costing system, what is the per unit cost for manufacturing overhead of 17-inch monitors (rounded)?

Question

Exhibit 17-2 BigView Monitors manufactures three different sizes of computer monitors: 15-inch, 17-inch, and 20-inch. The company has recently implemented an activity-based costing system. BigView has identified five different production activities as well as the best cost driver for each activity. Each activity and driver is listed below, along with the budgeted amount that is associated with each activity for next year.
 The following information relates to each size of monitor and next year's anticipated manufacturing operations:

- Refer to Exhibit 17-2. Under an activity-based product costing system, what is the per unit cost for manufacturing overhead of 17-inch monitors (rounded)?

Quizplus · Accepted Answer

The total overhead cost for the 17-inch monitors is: 
Activity 1: $12 x 1,000 = $12,000 (2,500 units of 15-inch monitors also use Activity 1, so the total budgeted cost of this activity is $60,000)
Activity 2: $4 x 4,000 = $16,000
Activity 3: $5 x 2,500 = $12,500
Activity 4: $3 x 2,000 = $6,000
Activity 5: $7 x 4,000 = $28,000
Total overhead cost for 17-inch monitors = $74,500

The total number of units to be produced is 8,000 (4,000 15-inch monitors + 2,000 17-inch monitors + 2,000 20-inch monitors)

Therefore, the per unit cost for manufacturing overhead of 17-inch monitors is:
$74,500 / 2,000 units = $37.25 per unit
$37.25 + ($80 direct materials + $122.50 direct labor) = $239.75 per unit

Rounded to the nearest dollar, the answer is $177.

Exhibit 17-2 BigView Monitors Manufactures Three Different Sizes of Computer