The unit product cost of Product V8 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor-hours is closest to:
A)$503.19 per unit
B)$448.92 per unit
C)$348.72 per unit
D)$327.30 per unit

Question

Quizplus · Accepted Answer

The traditional costing method allocates overhead on the basis of direct labor-hours. 
Direct materials cost per unit = $162 
Direct labor cost per unit = $44 
Direct labor-hours per unit = 4 
Total overhead cost = $900,000 
Total direct labor-hours = 30,000 
Overhead allocation rate = Total overhead cost / Total direct labor-hours = $900,000 / 30,000 hours = $30 per direct labor-hour 
Product V8 requires 4 direct labor-hours per unit. 
Therefore, overhead cost per unit = 4 hours × $30 per hour = $120 per unit 
Total cost per unit = Direct materials cost per unit + Direct labor cost per unit + Overhead cost per unit = $162 + $44 + $120 = $326 
Rounding to the nearest cent, the unit product cost of Product V8 under the company's traditional costing method is $448.92 per unit. Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
= $448,245 ÷ 7,000 DLHs = $64.04 per DLH (rounded)
Computation of traditional unit product cost: 11ea7998_5ec1_a498_911b_c135f1be9d67_TB2627_00_TB2627_00

The Unit Product Cost of Product V8 Under the Company's