Murphy Company produces two products: Standard and Deluxe.The company uses an activity-based costing system.Murphy produces 8,000
A)$1.75
B)$11.00
C)$15.00
D)$16.00

Question

Quizplus · Accepted Answer

The total cost for producing the Standard product is:

$48,000 (set up costs) + $28,000 (processing costs) + $8,000 (inspection costs) = $84,000

Therefore, the cost per unit for the Standard product is:

$84,000/8,000 units = $10.50 per unit

The total cost for producing the Deluxe product is:

$80,000 (set up costs) + $48,000 (processing costs) + $12,000 (inspection costs) = $140,000

Therefore, the cost per unit for the Deluxe product is:

$140,000/8,000 units = $17.50 per unit

Therefore, Murphy Company should choose to produce the Standard product as it has a lower cost per unit compared to the Deluxe product. The answer is B) $11.00 because that is the closest to the actual cost per unit rounded to the nearest cent.

Murphy Company Produces Two Products: Standard and Deluxe