Quality Stereo Company has provided the following information regarding its activity-based costing system:
Purchasing department costs are allocated based on purchase orders and the cost allocation rate is $75 per purchase order.
Assembly department costs are allocated based on the number of parts used and the cost allocation rate is $1.00 per part.
Packaging department costs are allocated based on the number of units produced and the allocation rate is $2.00 per unit produced.
Each stereo produced has 50 parts and the direct materials cost per unit is $70. Quality Stereo has an order for 1,000 stereos which will require 50 purchase orders. What is the selling price per unit assuming that Quality Stereo adds a 20% markup to total cost?
A) $66.90
B) $146.40
C) $148.50
D) $150.90

Question

Quizplus · Accepted Answer

To calculate the selling price per unit, first determine the total cost per unit. The purchasing cost is 50 purchase orders * $75 = $3,750. The assembly cost is 50 parts * 1,000 units * $1 = $50,000. The packaging cost is 1,000 units * $2 = $2,000. The direct materials cost is 1,000 units * $70 = $70,000. Total cost = $3,750 + $50,000 + $2,000 + $70,000 = $125,750. Cost per unit = $125,750 / 1,000 = $125.75. With a 20% markup, the selling price per unit = $125.75 * 1.20 = $150.90.

Quality Stereo Company Has Provided the Following Information Regarding Its