Jarme company makes 2 products and is implementing an activity based cosing (ABC) system. Previously, all overhead had been applied on the basis of machine hours. The company produces 100,000 units of product D and 5,000 units of product F annually.
Cost Pool Driver & Level Cost in Pool Use of Driver by D Use of Driver by F
Equipment Setup 500 setups $1,000,000 350 setups 150 setups
Materials Ordering 10,000 orders $2,000,000 7,000 orders 3,000 orders
Quality Control 4,000 inspections $500,000 2,000 inspections 2,000 inspections
Machining 50,000 machine hrs $5,000,000 40,000 machine hrs 10,000 machine hrs
What is the overhead cost per unit for Product F when all overhead is applied based on machine hours?
a) $170
b) $340
c) $68
d) $200
What is the overhead cost per unit for Product D when all overhead is applied based on machine hours?
a) $170
b) $68
c) $340
d) $40