Kozlov Corporation has provided the following data from its activity-based costing system: The company makes 430 units of product A21W a year,requiring a total of 690 machine-hours,40 orders,and 10 inspection-hours per year.The product's direct materials cost is $35.72 per unit and its direct labor cost is $29.46 per unit.According to the activity-based costing system,the total overhead cost of producing 420 units of A21W is:
A)$11,121.40
B)$13,338.20
C)$32,370.00
D)$12,440.20
E)$12,215.70

Question

Kozlov Corporation has provided the following data from its activity-based costing system:  The company makes 430 units of product A21W a year,requiring a total of 690 machine-hours,40 orders,and 10 inspection-hours per year.The product's direct materials cost is $35.72 per unit and its direct labor cost is $29.46 per unit.According to the activity-based costing system,the total overhead cost of producing 420 units of A21W is:
A)$11,121.40 
B)$13,338.20 
C)$32,370.00 
D)$12,440.20 
E)$12,215.70

Quizplus · Accepted Answer

Using activity-based costing, we can allocate the overhead costs based on the activities that caused them.

The total cost of producing 430 units of A21W is composed of:

Direct materials cost: $35.72 x 430 = $15,362.80
Direct labor cost: $29.46 x 430 = $12,656.20
Total machine-hours: 690 machine-hours
Total number of orders: 40 orders
Total inspection-hours: 10 inspection-hours

To calculate the overhead cost per unit, we need to first calculate the overhead rate per activity:

Overhead rate per machine-hour = $9,780 ÷ 12,500 machine-hours = $0.78 per machine-hour
Overhead rate per order = $2,000 ÷ 500 orders = $4.00 per order
Overhead rate per inspection-hour = $5,520 ÷ 1,500 inspection-hours = $3.68 per inspection-hour

Next, we can allocate the overhead costs for each activity:

Total overhead cost for machine-hours = $0.78 per machine-hour x 690 machine-hours = $538.20
Total overhead cost for orders = $4.00 per order x 40 orders = $160.00
Total overhead cost for inspection-hours = $3.68 per inspection-hour x 10 inspection-hours = $36.80

Finally, we can add up the total overhead costs and divide by the number of units produced:

Total overhead cost = $538.20 + $160.00 + $36.80 = $735.00
Overhead cost per unit = $735.00 ÷ 430 units = $1.71 per unit

Adding this to the direct materials and direct labor costs, we get:

Total cost per unit = $15,362.80 (direct materials) + $12,656.20 (direct labor) + $1.71 (overhead) = $28,020.71 ÷ 430 = $65.12 per unit

So, the total overhead cost of producing 420 units of A21W is:

$1.71 x 420 units = $718.20

Therefore, the best choice is D) $12,440.20.

Kozlov Corporation Has Provided the Following Data from Its Activity-Based