The overhead applied to each unit of Product J8 under activity-based costing is closest to:

A) $629.91 per unit
B) $723.78 per unit
C) $740.39 per unit
D) $405.73 per unit

Question

The overhead applied to each unit of Product J8 under activity-based costing is closest to:A) $629.91 per unitB) $723.78 per unitC) $740.39 per unitD) $405.73 per unit

Kenia Murillo · Accepted Answer

Final Answer : B, Explanation :  To calculate the overhead rate, we need to first calculate the total overhead cost for each activity:Activity 1: $600,000 + $250,000 = $850,000Activity 2: $300,000 + $180,000 = $480,000Activity 3: $400,000 + $150,000 = $550,000Activity 4: $120,000 + $90,000 + $60,000 = $270,000Next, we need to calculate the cost driver rates:Activity 1: $850,000 / 15,000 machine hours = $56.67 per machine hourActivity 2: $480,000 / 1,600 setups = $300 per setupActivity 3: $550,000 / 10,000 direct labor hours = $55 per direct labor hourActivity 4: $270,000 / 9,000 material moves = $30 per material moveFinally, we can calculate the overhead applied to Product J8:Activity 1: 2,000 machine hours x $56.67 per machine hour = $113,340Activity 2: 3 setups x $300 per setup = $900Activity 3: 4,500 direct labor hours x $55 per direct labor hour = $247,500Activity 4: 2,250 material moves x $30 per material move = $67,500Total overhead cost applied to Product J8 = $429,240Overhead per unit of Product J8 = $429,240 / 594 units = $723.78 per unitTherefore, the answer is B. Computation of activity rates:   Computation of the overhead cost per unit under activity-based costing.

The overhead applied to each unit of Product J8 under activity-based costing is closest to:

A) $629.91 per unit
B) $723.78 per unit
C) $740.39 per unit
D) $405.73 per unit

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