Question

Jaunkas Corp. manufactures mid-fi and hi-fi stereo receivers. The following data have been summarized:

Mid-Fi Hi-Fi

Direct materials cost per unit \( 400 \) 1,800

Direct labor cost per unit 600 400

Indirect manufacturing cost per unit ? ?

Indirect manufacturing cost information includes the following:

Activity	Predetermined Overhead Allocation Rate	Mid-Fi	Hi-Fi
Setup	\( 1,400 per setup	36 setups	36 setups
Inspection	\) 700 per inspection hour	35 inspection hours	20 inspection hours
Machine maintenance	$ 13 per machine hour	1,900 machine hours	1,150 machine hours

The company plans to manufacture 125 units of the mid-fi receivers and 250 units of the hi-fi receivers. Calculate the product cost per unit for both products using activity-based costing.

Short answer

Per unit indirect cost

For Mid-Fi: $796.8

For Hi-Fi:$317.4

Step-by-step solution

Per unit product cost for Mid-Fi

$$\begin{gathered} \mathbf{setup}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{=}\mathbf{predetermined}\mathbf{}\mathbf{overhead}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{rate}\mathbf{}\mathbf{\times }\mathbf{No}\mathbf{.}\mathbf{of}\mathbf{}\mathbf{setups}\mathbf{} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{1}\mathbf{,}\mathbf{400}\mathbf{\times }\mathbf{36} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{50}\mathbf{,}\mathbf{400} \end{gathered}$$

$$\begin{gathered} \mathbf{Inspection}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{=}\mathbf{predetermined}\mathbf{}\mathbf{overhead}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{rate}\mathbf{}\mathbf{\times }\mathbf{No}\mathbf{.}\mathbf{of}\mathbf{}\mathbf{inspection}\mathbf{}\mathbf{hour} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{700}\mathbf{\times }\mathbf{35} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{24}\mathbf{,}\mathbf{500} \end{gathered}$$

$$\begin{gathered} \mathbf{machine}\mathbf{}\mathbf{maintenance}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{=}\mathbf{predetermined}\mathbf{}\mathbf{overhead}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{rate}\mathbf{}\mathbf{\times }\mathbf{No}\mathbf{.}\mathbf{of}\mathbf{}\mathbf{machine}\mathbf{}\mathbf{hour} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{13}\mathbf{\times }\mathbf{1}\mathbf{,}\mathbf{900} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{24}\mathbf{,}\mathbf{700} \end{gathered}$$

role="math" localid="1651119026428" $$\begin{gathered} \mathbf{total}\mathbf{}\mathbf{indirect}\mathbf{}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{=}\mathbf{}\mathbf{setup}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{+}\mathbf{inspection}\mathbf{}\mathbf{cost}\mathbf{+}\mathbf{machine}\mathbf{}\mathbf{maintenance}\mathbf{}\mathbf{cost} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{50}\mathbf{,}\mathbf{400}\mathbf{+}\mathbf{}\mathbf{\$}\mathbf{24}\mathbf{,}\mathbf{500}\mathbf{+}\mathbf{\$}\mathbf{24}\mathbf{,}\mathbf{700} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{99}\mathbf{,}\mathbf{600} \end{gathered}$$

$$\begin{gathered} \mathbf{Per}\mathbf{}\mathbf{unit}\mathbf{}\mathbf{indirect}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{}\mathbf{=}\frac{\mathbf{total}\mathbf{}\mathbf{indirect}\mathbf{}\mathbf{cost}}{\mathbf{number}\mathbf{}\mathbf{of}\mathbf{}\mathbf{products}\mathbf{}\mathbf{manufactured}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\mathbf{\$}\mathbf{99}\mathbf{,}\mathbf{600}}{\mathbf{125}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{796}\mathbf{.}\mathbf{8} \end{gathered}$$

Per unit product cost for Hi-Fi

$$\begin{gathered} \mathbf{setup}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{=}\mathbf{predetermined}\mathbf{}\mathbf{overhead}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{rate}\mathbf{}\mathbf{\times }\mathbf{No}\mathbf{.}\mathbf{of}\mathbf{}\mathbf{setups}\mathbf{} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{1}\mathbf{,}\mathbf{400}\mathbf{\times }\mathbf{36} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{50}\mathbf{,}\mathbf{400} \end{gathered}$$

$$\begin{gathered} \mathbf{Inspection}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{=}\mathbf{predetermined}\mathbf{}\mathbf{overhead}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{rate}\mathbf{}\mathbf{\times }\mathbf{No}\mathbf{.}\mathbf{of}\mathbf{}\mathbf{inspection}\mathbf{}\mathbf{hour} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{700}\mathbf{\times }\mathbf{20} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{14}\mathbf{,}\mathbf{000} \end{gathered}$$

$$\begin{gathered} \mathbf{machine}\mathbf{}\mathbf{maintenance}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{=}\mathbf{predetermined}\mathbf{}\mathbf{overhead}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{rate}\mathbf{}\mathbf{\times }\mathbf{No}\mathbf{.}\mathbf{of}\mathbf{}\mathbf{machine}\mathbf{}\mathbf{hour} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{13}\mathbf{\times }\mathbf{1}\mathbf{,}\mathbf{150} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{14}\mathbf{,}\mathbf{950} \end{gathered}$$

$$\begin{gathered} \mathbf{total}\mathbf{}\mathbf{indirect}\mathbf{}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{=}\mathbf{}\mathbf{setup}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{+}\mathbf{inspection}\mathbf{}\mathbf{cost}\mathbf{+}\mathbf{machine}\mathbf{}\mathbf{maintenance}\mathbf{}\mathbf{cost} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{50}\mathbf{,}\mathbf{400}\mathbf{+}\mathbf{}\mathbf{\$}\mathbf{14}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{\$}\mathbf{14}\mathbf{,}\mathbf{950} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{79}\mathbf{,}\mathbf{350} \end{gathered}$$

$$\begin{gathered} \mathbf{Per}\mathbf{}\mathbf{unit}\mathbf{}\mathbf{indirect}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{}\mathbf{=}\frac{\mathbf{total}\mathbf{}\mathbf{indirect}\mathbf{}\mathbf{cost}}{\mathbf{number}\mathbf{}\mathbf{of}\mathbf{}\mathbf{products}\mathbf{}\mathbf{manufactured}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\mathbf{\$}\mathbf{79}\mathbf{,}\mathbf{350}}{\mathbf{125}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{317}\mathbf{.}\mathbf{4} \end{gathered}$$