Paparo Corporation has provided the following data from its activity-based costing system:

Activity Cost Pool Total Cost Total Activity
Assembly $846,040 52,000 machine-hours
Processing orders $64,056 1,700 orders
Inspection $102,408 1,360 inspection-hours

Data concerning the company's product Q79Y appear below:

Annual unit production and sales 450
Annual machine-hours 1,080
Annual number of orders 70
Annual inspection hours 20
Direct materials cost $44.00 per unit
Direct labor cost $41.03 per unit

According to the activity-based costing system, the average cost of product Q79Y is closest to .

Unitary cost= $133.30

Explanation:

Giving the following information:

Activity Cost Pool - Total Cost - Total Activity

Assembly - $846,040 - 52,000 machine-hours

Processing orders - $64,056 - 1,700 orders

Inspection - $102,408 - 1,360 inspection-hours

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

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Assembly= 846,040/52,000= $16.27 per machine-hour

Processing= 64,056/1,700= $37.68 per order

Inspection= 102,408/1,360= $75.3 per inspection hour

Now, we can allocate overhead to product Q79Y:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Assembly=16.27*1,080= $17,571.6

Processing= 37.68*70= $2,637.6

Inspection= 75.3*20= $1,506

Total overhead= $21,715.2

Data concerning the company's product Q79Y appear below:

Annual unit production and sales 450

Direct materials cost $44.00 per unit

Direct labor cost $41.03 per unit

Finally, we calculate the unitary cost of product Q79Y:

Unitary cost= direct material + direct labor + allocated overhead

Unitary cost= 44 + 41.03 + (21,715.2/450)= $133.30

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