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24 September, 13:47

Olmo, Inc., manufactures and sells two products: Product K0 and Product H9. The annual production and sales of Product of K0 is 600 units and of Product H9 is 600 units. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product K0 Product H9 Total Labor-related DLHs $ 550,908 3,600 1,800 5,400 Production orders orders 53,919 700 400 1,100 Order size MHs 836,516 4,000 3,100 7,100 $ 1,441,343 The overhead applied to each unit of Product K0 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.)

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  1. 24 September, 17:24
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    The overhead applied cost per unit in Product KO = $1,577.18

    Explanation:

    Step 1 : Calculate PreDetermined Overheard Rate (POR) per Activity cost pool

    POR = estimated overheard cost / total of basis

    Labor = $550,908/5,400 = $122.42

    Production = $53,919/1,100 = $49,02

    Order = $836,516/7,100=$117.82

    Step 2 : Multiply each POR to the usage of product KO on each of the cost pool activity

    Labor = $122.42 * 3600 = $440,712

    Production = $49.02 * 700 = $34,314

    Order = $117.82 * 4,000 = $471,280

    Total Cost Product KO = $946,306

    Step 3 : Divide the total cost by units produced

    per unit = $946,306 / 600 units

    = $1,577.18
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