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Thursday, 17 April 2014

Klumper Corporation is a diversified manufacturer of industrial goods. The company's activity based costing system contains the following six activity cost pools and activity rates:

Klumper Corporation is a diversified manufacturer of industrial goods. The company's activity based costing system contains the following six activity cost pools and activity rates:  
  Activity Cost Pool         Activity Rates
  Labor related $ 7.40  per direct labor-hour
  Machine related $ 3.41  per machine-hour
  Machine setups $ 41.00  per setup
  Production orders $ 195.00  per order
  Shipments $ 106.00  per shipment
  General factory $ 3.81  per direct labor-hour


Cost and activity data have been supplied for the following products:
 
  K425 M67
  Direct materials cost per unit $ 5.72   $ 39.99  
  Direct labor cost per unit $ 3.72   $ 6.54  
  Number of units produced per year   3,900     40  


  Total Expected Activity
   K425    M67
  Direct labor-hours 890     30  
  Machine-hours 3,400     35  
  Machine setups 8     1  
  Production orders 6     1  
  Shipments 10     1  


Required:
Compute the unit product cost of each product listed above. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)
 
  K425 M67
  Unit product cost $   $  
 

Explanation:
The overhead costs assigned to each product would be computed as follows:
 
  K425 M67
  Expected
Activity
Amount Expected
Activity
Amount
  Labor related, at $7.40 per direct labor-hour 890      $ 6,586   30   $  222  
  Machine related, at $3.41 per machine-hour 3,400        11,594   35     119  
  Machine setups, at $41.00 per setup 8        328   1     41  
  Production orders, at $195.00 per order 6        1,170   1     195  
  Shipments, at $106.00 per shipment 10        1,060   1     106  
  General factory, at $3.81 per direct labor hour 890        3,391   30     114  
   
 
  Total overhead cost assigned (a)   $ 24,129     $ 798  
   

 

  # of units produced     3,900       40  
   

 

  Overhead cost per unit   $ 6.19     $ 19.94  
   

 



The product costs combine direct materials, direct labor, and overhead costs as follows:
 
  K425   M67
  Direct materials $ 5.72     $ 39.99  
  Direct labor   3.72       6.54  
  Manufacturing overhead (see above)   6.19       19.94  
 
 
  Unit product cost $ 15.63     $ 66.47