Boutet, Inc., manufactures and sells two products: Product G5 and Product U1. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: The direct labor rate is $21.10 per DLH. The direct materials cost per unit is $241.40 for Product G5 and $283.80 for Product U1. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The overhead applied to each unit of Product G5 under activity-based costing is closest to:

Question

Boutet, Inc., manufactures and sells two products: Product G5 and Product U1. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:  The direct labor rate is $21.10 per DLH. The direct materials cost per unit is $241.40 for Product G5 and $283.80 for Product U1. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:  The overhead applied to each unit of Product G5 under activity-based costing is closest to:

Quizplus · Accepted Answer

First, we need to calculate the predetermined overhead rate for each activity cost pool:

Activity 1: $272,000 / 4,000 = $68 per setup hour
Activity 2: $489,600 / 24,480 = $20 per DLH
Activity 3: $152,000 / 8,000 = $19 per inspection

Next, we need to calculate the total overhead cost assigned to each product using the activity rates and expected activity:

Product G5:

Activity 1: 300 setups x $68 = $20,400
Activity 2: 2,000 DLHs x $20 = $40,000
Activity 3: 400 inspections x $19 = $7,600

Total overhead cost = $68,000

Product U1:

Activity 1: 200 setups x $68 = $13,600
Activity 2: 4,000 DLHs x $20 = $80,000
Activity 3: 600 inspections x $19 = $11,400

Total overhead cost = $105,000

Finally, we can calculate the overhead cost per unit by dividing the total overhead cost by the expected production:

Product G5:

Overhead cost per unit = $68,000 / 4,000 units = $17 per unit

Direct materials cost per unit = $241.40

Direct labor cost per unit = 2 DLHs x $21.10 = $42.20

Total cost per unit = $300.60

Product U1:

Overhead cost per unit = $105,000 / 2,400 units = $43.75 per unit

Direct materials cost per unit = $283.80

Direct labor cost per unit = 5 DLHs x $21.10 = $105.50

Total cost per unit = $432.05

Therefore, the overhead applied to each unit of Product G5 under activity-based costing is:

$17 + $241.40 + $42.20 = $300.60

This is closest to answer choice B, $563.08 per unit.