
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:QS 4-5
Chen Company identified the following activities, costs, and activity drivers.
Activity
Expected Costs
Handling materials
Inspecting product
Processing purchase orders
Paying suppliers.
Insuring the factory
Designing packaging
Production volume
Parts required
Batches made
Purchase orders
Invoices
Space occupied
Models
$625,000
900,000
105,000
175,000
300,000
375.000
Fast Model
10,000 units
20,000 parts
250 batches
50 orders
50 invoices
10,000 sq.ft.
I model
Expected Activity
100,000 parts in stock
1,500 batches
700 orders
500 invoices
40,000 square feet
10 models
Standard Model
30,000 units
30,000 parts
100 batches
20 orders
10 invoices
7,000 sq.ft.
I model
Required
1. Assign overhead costs to each product model using activity-based costing (ABC). What is the cost per
unit of each model?
2. Assume the plantwide overhead rate is $24.80/DLH. Assign overhead costs to each product model
using the single plantwide overhead rate assuming the fast model requires 25,000 direct labor hours and
the standard model requires 60,000 direct labor hours. What is the overhead cost per unit for each
model?
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