Exercise $17-17($Algo$)$ Using activity$-$based costing to allocate overhead, compute product cost and gross profit LO P$3$

Ice Cool produces two different models of air conditioners. The activities, costs, and cost drivers associated with the production processes follow.

Process Activity Budgeted Cost Activity Cost Driver Budgeted Activity Usage

Assembly Machining $ $311,800$ Machine hours $($MH$)7,400$

Setups $24,000$ Setups $240$

$ $335,800$

Finishing Inspecting $ $220,000$ Inspections $860$

Support Purchasing $ $138,000$ Purchase orders $450$

Additional production information concerning its two models follows.

Units and Activities Model X Model Z

Units produced $1,6003,200$

Machine hours $2,4005,000$

Setups $80160$

Inspections $500360$

Purchase orders $300150$

Per Unit Model X Model Z

Selling price per unit $ $420$ $ $400$

Direct materials cost per unit $150115$

Direct labor cost per unit $135130$

$1.$ Compute the activity rate for each activity using activity$-$based costing.

$2.$ Using activity$-$based costing, compute the overhead cost per unit for each model.

$3.$ Compute the total product cost per unit for each model.

$4.$ For each model, compute the gross profit per unit $($selling price per unit minus product cost per unit$).$