25 Chhom, Inc., manufactures and sells two products: Product F9 and Product U4. Data concerning the expected...

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Solution:

Chhom, Inc.,

Calculation of Activity Rate for each Activity driver as per Activity Based Costing
Activity	Overhead Cost	Activity Driver	Total No. of Activities	Activity Rate = (Activity Overhead cost/No. of Units)
Labor Related	$ 34,600.00	Direct Labor Hours	1000	$ 34.60
Production Orders	$ 54,940.00	No. of Orders	400	$ 137.35
Order Size	$ 111,950.00	MHs	6300	$ 17.77
		None
Total	$ 201,490.00

Overhead applied to each unit of Product U4
Activity	Total No. of Activities for Product U4 (a)	Activity Rate (b)	Total Cost of Activity (c) = (a) x (b)
Labor Related	200	$ 34.60	$ 6,920.00
Production Orders	200	$ 137.35	$ 27,470.00
Order Size	2900	$ 17.77	$ 51,533.00
Total Overhead costs			$ 85,923.00
Expected production of U4			200 units
Overhead applied for each unit	85923/200	$ 429.62

Therefore the overhead applied to each unit of Product U4 under activity based costing is closed to $430

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