Vanguard corporation has provided the following data from its activity-based costing system: activity cost pool total cost total activityassembly $ 942,480 66,000 machine-hoursprocessing orders $ 85,050 1,800 ordersinspection $ 126,854 1,820 inspection-hours

Average Cost Per Unit = $94.11

Explanation:

The activity rates for each activity cost pool are computed as follows:

Assembly = $942,480 / 66,000 machine-hours = $14.28 per machine-hour

Processing orders = $85,050 / 1,800 orders = $47.25 per order

Inspection = $126,854 / 1,820 inspection-hours = $69.70 per inspection-hour

The overhead cost charged to Product O37W is:

Assembly = $14.28 per machine-hour x 690 machine-hours = $9,853.20

Processing orders = $47.25 per order x 40 orders = $1,890

Inspection = $69.70 per inspection-hour x 10 inspection-hours = $697

Total Overhead Cost = 12,440.20

The Average Cost of Product O37W is:

Direct Material = 430 units x $35.72 per unit = $15,359.60

Direct Labor = 430 units x $29.46 per unit = $12,667.80

Overhead = $12,440.20

Total Cost = $40,467.60

Average Cost Per Unit = $40,467.60 / 430 Units = $94.11

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation: