Ringing Solutions produces 12,000 units of a cell phone.The production requires prime costs of $400,000, uses 2,500 machine hours, and takes 1,800 setup hours.The activity rates are $50 per machine hour and $130 per setup hour.What is the unit cost of a cell phone? (Note: Round answer to two decimal places.)
A) $60.15
B) $40.35
C) $63.25
D) $100.65
E) $30.55

Question

Quizplus · Accepted Answer

Unit cost = (Total costs / Units)
Unit cost = [Prime cost + (Machine hours × Activity rate per machine hour) + (Setup hours × Activity rate per setup hour)] / Units
Unit cost = [$400,000 + (2,500 machine hours × $50) + (1,800 setup hours × $130)] / 12,000 units = $63.25

Ringing Solutions Produces 12,000 Units of a Cell Phone