Question
Mellencamp, Inc., manufactures and sells two products: Product A3 and Product Y6. Data concerning the expected production of each product and the expected total direct
Mellencamp, Inc., manufactures and sells two products: Product A3 and Product Y6. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product A3 900 8.0 7,200 Product Y6 800 10.0 8,000 Total direct labor-hours 15,200 The direct labor rate is $24.20 per DLH. The direct materials cost per unit is $146.60 for Product A3 and $256.20 for Product Y6. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product A3 Product Y6 Total Labor-related DLHs $670,624 7,200 8,000 15,200 Production orders orders 41,545 400 300 700 General factory MHs 281,281 3,800 3,900 7,700 $993,450 The unit product cost of Product A3 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor-hours is closest to: $632.44 per unit $693.16 per unit $815.00 per unit $863.08 per unit
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