Sheddon Industries produces two products. The products' identified costs are as follows: The company's overhead costs of $108,000 are allocated based on direct labor cost. Assume 4,000 units of product A and 5,000 units of Product B are produced. What is the cost per unit for product B? (Do not round your intermediate calculations.)
A) $7.80
B) $22.20
C) $16.80
D) None of the answers are correct.

Question

Sheddon Industries produces two products. The products' identified costs are as follows:  The company's overhead costs of $108,000 are allocated based on direct labor cost. Assume 4,000 units of product A and 5,000 units of Product B are produced. What is the cost per unit for product B? (Do not round your intermediate calculations.)
A) $7.80 
B) $22.20 
C) $16.80 
D) None of the answers are correct.

Quizplus · Accepted Answer

Total costs to produce product B = (Direct material cost + Direct labor cost + Overhead cost)
Total costs to produce product B = $15,000 + $24,000 + [$108,000 ÷ ($12,000 + $24,000) × $24,000]
Total costs to produce product B = $15,000 + $24,000 + $72,000 = $111,000
Cost per unit for product B = Total costs to produce product B ÷ Number of units produced
Cost per unit for product B = $111,000 ÷ 5,000 = $22.20 per unit

Sheddon Industries Produces Two Products