Product X requires direct material of $25.00 per unit, direct labor of $30.00 per unit, 1.5 direct labor hours, and 2 options. Using activity-based costing, what is Temple Lighting’s overhead cost per unit of product? Select one: a. $25.00 b. $42.50 c. $40.00 d. $55.00

The answer is option (b)$42.50

Explanation:

Solution

Given that:

Temple Lighting    

Calculation of ABC rates:

Allocation table        A                           B                    C=A*B

Activity cost poolCost Driver ABC Rates Activity use Cost assigned

Assembly  Direct Labor Hour     10.00                 1.5             15.00

Design         Number of option       12.50                 2.00   25.00

Packaging  Units produced      2.50                 1.00           2.50

TOTAL:

15.00 + 25.00 +2.50 =$42.50

Therefore the Temple Lighting’s overhead cost per unit of product is $42.50

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