Crump Manufacturing 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 $52 per purchase order.
Assembly department costs are allocated based on the number of machine hours and the cost allocation rate is $27 per machine hour.
Inspection department costs are allocated based on the number of inspection hours and the allocation rate is $39 per inspection hour.
Each unit produced has a direct materials cost of $70 and a direct labor cost of $65. Crump has an
Order for 500 units which will require 40 purchase orders, 750 machine hours, and 50 inspection hours. What is the selling price per unit assuming that Crump adds a 40% markup to total cost?
A) $183.56
B) $354.20
C) $256.98
D) $67.98

Question

Quizplus · Accepted Answer

To find the selling price per unit, first calculate the total cost per unit and then apply the 40% markup. 1. Calculate the total allocated costs:- Purchasing department: 40 purchase orders * $52/order = $2,080- Assembly department: 750 machine hours * $27/hour = $20,250- Inspection department: 50 inspection hours * $39/hour = $1,9502. Sum of allocated costs = $2,080 + $20,250 + $1,950 = $24,2803. Direct costs per unit: $70 (materials) + $65 (labor) = $1354. Total cost for 500 units = (500 * $135) + $24,280 = $67,500 + $24,280 = $91,7805. Total cost per unit = $91,780 / 500 = $183.566. Selling price per unit with 40% markup = $183.56 * 1.40 = $256.984Rounded to two decimal places, the selling price per unit is $256.98, which corresponds to option C.

Crump Manufacturing Has Provided the Following Information Regarding Its Activity-Based