Lexter Company incurred an activity cost of 180000 for inspe

Lexter Company incurred an activity cost of $180,000 for inspecting 25,000 units of production. Management determined that the inspecting objectives could be met without inspecting every unit. Therefore, rather than inspecting 25,000 units of production, the inspection activity was limited to 40% of the production.

Determine the inspection activity cost per unit on 25,000 units of total production both before and after the improvement. Round your answers to the nearest cent.

Inspection activity before improvement

$

per unit

Inspection activity after improvement

$

per unit

Solution

ANS

INSPECTION ACTIVITY BEFORE IMPROVEMENT = $7.2 PER UNIT ($180000/25000 UNITS)

INSPECTION ACTIVITY AFTER IMPROVEMENT = $2.88 PER UNIT ($72000/25000 UNITS) [(25000 UNITS * 40%) * $7.2] = $72000