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Direct material cars: $5,000 watches: $1,000 labor hours cars: 9 watches: 3 ...

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Accounting

Direct material cars: $5,000 watches: $1,000
labor hours cars: 9 watches: 3
labor rate per hour cars: $20 watches: $20
number made and sold cars: 2000 watches: 7000
overhead:
rent on factory where both are made: $300,000
lathe: $100,000
diagnostic machine: $100,000
inspection: $200,000
Total overhead: $700,000
1. Determine the cost of a car and a watch if the company uses labor hours to allocate overhead.
2. The company decided to use activity based costing and determined the following:
rent labor hours
lathe 1 hour per watch and 3 hours per car
diagnostic machine 2 hours per watch and 2 hours per car
inspection 1 hour per watch and 1/2 hour per car
Determine the cost of a car and a watch using activity based costing

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