Morrison Company Morrison Company manufactures two products: digital cameras and video cameras.The company uses an activity-based costing system.The annual production and sales volume of digital cameras is 10,000 units and of video cameras is 8,000 units.Direct costs for the digital cameras are $122;for the video cameras,direct costs are $153. For overhead costs,there are three activity cost pools with the following expected activities and estimated total costs:

Activity Cost Pool Estimated Cost Expected Activity IPods Expected Activity MP3 players Total

Activity 1 $30,000 100 500 600

Activity 2 $45,000 600 300 900

Activity 3 $96,600 400 2,000 2,400

Refer to Morrison Company.Using ABC,the total cost per video camera is approximately: A)$162.50 B)$163.69 C)$168.35 D)$168.07

Question

Morrison Company
Morrison Company manufactures two products: digital cameras and video cameras.The company uses an activity-based costing system.The annual production and sales volume of digital cameras is 10,000 units and of video cameras is 8,000 units.Direct costs for the digital cameras are $122;for the video cameras,direct costs are $153.
For overhead costs,there are three activity cost pools with the following expected activities and estimated total costs:

Activity Cost Pool	Estimated Cost	Expected Activity IPods	Expected Activity MP3 players	Total
Activity 1	$30,000	100	500	600
Activity 2	$45,000	600	300	900
Activity 3	$96,600	400	2,000	2,400

Refer to Morrison Company.Using ABC,the total cost per video camera is approximately: A)$162.50 B)$163.69 C)$168.35 D)$168.07

Quizplus · Accepted Answer

To calculate the total cost per video camera using Activity-Based Costing (ABC), we first allocate the overhead costs to each product based on the activity drivers, then add the direct costs.1. Activity 1: $30,000 / 600 = $50 per activity unit. Video cameras use 500 units, so $50 * 500 = $25,000 for video cameras.2. Activity 2: $45,000 / 900 = $50 per activity unit. Video cameras use 300 units, so $50 * 300 = $15,000 for video cameras.3. Activity 3: $96,600 / 2,400 = $40.25 per activity unit. Video cameras use 2,000 units, so $40.25 * 2,000 = $80,500 for video cameras.Total overhead allocated to video cameras = $25,000 + $15,000 + $80,500 = $120,500.Total overhead cost per video camera = $120,500 / 8,000 units = $15.06.Adding the direct cost: $153 + $15.06 = $168.06, which rounds to $168.07.

Morrison Company Morrison Company Manufactures Two Products: Digital Cameras and Video Cameras.The