GAMMA produces over a hundred different types of residential water faucets as its
Delta, Florida plant .This plant uses activity -based costing to calculate product costs.
The following table summarizes the plant's overhead for the year and the cost drivers
Used for each activity center:
Summary of plant Overhead and Activity Centers
Total cost
(millions
Activity center of dollars) Cost driver Amount of cost Activity cost per unit
&nbs p; &n bsp; Driver of cost drive
Materials handling $20.8 Direct materials $130 million $ 0.16
Purchasing 13.8 part numbers 800 $17,250
Set-up labor 6.8 &n bsp;Batches 500 $13,600
Engineering 10.9 Number of products 125 $87,200
Occupancy 16.2 &nb sp;Direct labor $ 90 million $0.18
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Total plant overhead $ 68.5
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One faucet model GAMMA manufactures is Explorer .Its total product cost is as follows:
Direct labor ; &nb sp; $ 121,700
Direct materials & nbsp; ; 90,500
Materials handling $ 90,500 $ 0.16 14,480
Purchasing 9 17,250 &nb sp; 155,250
Setup ; 8 13,600 &n bsp; 108,800
Engineering ; 1 87,200 &nb sp; 87, 200
Occupancy $121,70 0 $0.18 &nbs p; 21,906
&nbs p; &n bsp; ---------------------
Total cost &nbs p; $599,836
Number of units manufactured &nbs p; 12,500
&nbs p; &n bsp; ---------------------
Product cost per unit &nbs p; $ 47.99
&nbs p; &n bsp; ----------------------
Required Question:
Calculate the product cost per unit of the Explorer faucet using absorption costing where plant
Overhead is assigned to products using direct labor dollars.