Bilingsly Limited, a manufacturer of a variety of products, uses an activity-based costing system. Information from its system for the year for all products follows: Bilingsly Limited makes 450 of its product B63 a year, which requires a total of 53 machine hours, 13 inspection hours, and 19 orders. Product B63 requires $45.70 in direct materials per unit and $58.20 in direct labor per unit. Product B63 sells for $265 per unit. What is the product margin in total for Product B63?

Question

Bilingsly Limited, a manufacturer of a variety of products, uses an activity-based costing system. Information from its system for the year for all products follows:  Bilingsly Limited makes 450 of its product B63 a year, which requires a total of 53 machine hours, 13 inspection hours, and 19 orders. Product B63 requires $45.70 in direct materials per unit and $58.20 in direct labor per unit. Product B63 sells for $265 per unit. What is the product margin in total for Product B63?

Quizplus · Accepted Answer

To find the product margin of Product B63, we need to first calculate the total cost of producing 450 units of B63.

Total cost = (direct materials cost + direct labor cost + manufacturing overhead cost) x number of units

The manufacturing overhead cost for Product B63 is calculated using the activity-based costing system as follows:

Machine hours cost = 53 machine hours x $15.80 = $837.40
Inspection hours cost = 13 inspection hours x $21.50 = $279.50
Order cost = 19 orders x $485 = $9,215

Total manufacturing overhead cost = $837.40 + $279.50 + $9,215 = $10,332.90

Direct materials cost = $45.70 x 450 = $20,565
Direct labor cost = $58.20 x 450 = $26,190

Total cost = ($20,565 + $26,190 + $10,332.90) x 450 = $28,458,905

The product margin is then calculated as follows:

Product margin = Sales price - Total cost = $265 x 450 - $28,458,905 = $70,335.50

Therefore, the answer is D) $70,335.50.

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