If the data from the cost analysis exercise is used as the basis for Activity Based Costing, what is the revised cost per unit?

The cost of one of the products produced by Veetee Co is currently calculated as follows:

Direct costs$5.78

Overheads$9.38 (based on 0.4laborhours per unit)

Total cost$15.16

A cost analysis exercise indicated that there are two categories of overhead costs, processing and handling. The table below shows the total cost of each activity, and the volume of the associated cost drivers.

ActivityCostCost driversVolume of cost driver

Processing$17,500Laborhours2,187.5

Handling$33,810Purchase orders48,300

Six purchase orders are required for each unit produced.

If the data from the cost analysis exercise is used as the basis for Activity Based Costing, what is the revised cost per unit?
A . $7・40
B . $13・18
C . $14・48
D . $8・70

View Answer

Answer: B