Exercise Algo Using activitybased costing to allocate overhead, compute product cost and gross profit LO P
Ice Cool produces two different models of air conditioners. The activities, costs, and cost drivers associated with the production processes follow.
Process Activity Budgeted Cost Activity Cost Driver Budgeted Activity Usage
Assembly Machining $ Machine hours MH
Setups Setups
$
Finishing Inspecting $ Inspections
Support Purchasing $ Purchase orders
Additional production information concerning its two models follows.
Units and Activities Model X Model Z
Units produced
Machine hours
Setups
Inspections
Purchase orders
Per Unit Model X Model Z
Selling price per unit $ $
Direct materials cost per unit
Direct labor cost per unit
Compute the activity rate for each activity using activitybased costing.
Using activitybased costing, compute the overhead cost per unit for each model.
Compute the total product cost per unit for each model.
For each model, compute the gross profit per unit selling price per unit minus product cost per unit
