ACTIVITY-BASED COSTING

PROBLEM NO.1

Lafayette Savings and Loan

Cost $50000
1. = = $ 𝟓𝟎 5. $ 30 x 100 = $ 3000
Units 1000

Cost $36000
2. = 400000 = $ 𝟎. 𝟎𝟗 6. $0.09 x 20,000 = $1,800
Units

Cost $15000
3. = 200000 = $ 𝟎. 𝟎𝟕𝟓 7. 400 x $50 = $20,000
Units

Cost $27000
4. = = $ 𝟑𝟎
Units 900

PROBLEM NO. 2

HAZEL COMPANY

1. Activity Cost Allocation Cost per Unit

3 1 $20,000 * 100/500 = $ 4,000 / 8,000 $0.50

2 $37,000 * 800/1,000 = $29,600 / 8,000 3.70

3 $91,200 * 800/3,800 = $19,200 / 8,000 2.40

Total Cost per Unit $ 6.60

2.

Activity Cost Allocation Cost per Unit

1 $20,000 * 400/500 = $ 16,000 / 6,000 $2.67

2 $37,000 * 200/1,000 = $ 7,400/ 6,000 1.23

3 $91,200 * 3,000/3,800 = $72,000 / 6,000 12.00

Total Cost per Unit $ 15.90

PROBLEM NO. 3

PHELPS COMPANY
Total Setup Cost $2000
1. = 56000 = $𝟎. 𝟎𝟑𝟓𝟕
Total Units

$500 x 4 = 2000

Total Setup Cost $2000

2. = 56000 = $𝟎. 𝟎𝟑𝟓𝟕
Total Units

$500 x 4 = 2000 setup cost

Setup Cost $500

3. = = $𝟓𝟎
Number of Units Produced 1000

Setup Cost $500

4. = = $𝟏/𝐮𝐧𝐢𝐭
Number of Units Produced 500

PROBLEM NO. 4

SMITHSON COMPANY

1.

Product A Function Hourly Hours Total

Rate

1 $ 10 2 $ 20

2 $7 1 $ 7

3 $18 6 $ 108

Totals 9 $ 135

Product B Function Hourly Hours Total

Rate

1 $ 10 1 $ 10

2 $7 8 $ 56

3 $ 18 1 $ 18

Totals 10 $ 84
 OH / Unit Units Produced Total

$ 135 800 $10800

$ 84 8000 $672000

Total Overhead $780000

Multiplied by Proportion (800/8000)
Allocated Overhead $70909.09
Divide by Units Produced / 800
OH per unit $ 88.64

2.

Total Overhead $780000

Multiplied by Proportion (800/8000)
Allocated Overhead $70909.09
Divide by Units Produced ÷ 800
OH per unit $ 88.64

3.

Product DL Hrs/Unit Units Produced Total DL Hours

A 4 800 3200
B 1.5 8000 12000
15200

Total Overhead $ 780000

Multiplied by Proportion (3200/15200)
Allocated Overhead 164,210.53
Divide by Units Produced ÷ 800
OH per unit $205.28

4.

Product DL Hrs/Unit Units Produced Total DL Hours

A 4 800 3200
B 1.5 8000 12000
15200

Total Overhead $ 780000

Multiplied by Proportion (12000/15200)
Allocated Overhead $615,789.47
Divide by Units Produced ÷ 8000
OH per unit $76.98
5.

Product Overhead Units Produced Total DL Hours

Activity hours
A 9 800 7200
B 10 8000 80000
87200

Total Overhead $ 780000

Multiplied by Proportion (7200/87200)
Allocated Overhead $64,403.67
Divide by Units Produced ÷ 800
OH per unit $80.50
DM and DL/unit x $ 35
Cost per Unit $ 115.50

6.

Product Overhead Units Produced Total DL Hours

Activity hours
A 9 800 7200
B 10 8000 80000
87200

Total Overhead $ 780000

Multiplied by Proportion (80000/87200)
Allocated Overhead $ 715,596.33
Divide by Units Produced ÷ 8000
OH per unit $89.44
DM and DL/unit x $ 22
Cost per Unit $ 111.44