Computation of cost of the products based on Activity Based Costing.
The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labor hours. The activity-based costing system would use three activity cost pools. Data relating to these activities for the current period are given below:
|
Activity
|
Estimated Overhead
|
Expected Activity
|
|
|
|
Cost Pool
|
Costs
|
Product C
|
Product D
|
Total
|
|
Machine setups
|
$13,630
|
130
|
160
|
290
|
|
Purchase orders
|
85,750
|
750
|
1,000
|
1,750
|
|
General factory
|
67,760
|
4,000
|
2,160
|
6,160
|
|
|
$167,140
|
|
|
|
Determine the unit product cost of each product for the current period using the activity-based costing approach.