L Company has provided the following information regarding i

L Company has provided the following information regarding its activity-based costing system:

1 stereo produced uses 20 parts that cost $1 each and uses $40 of direct labor costs. L Company has an order for 1,000 stereos which will require 5 purchase orders in all.

What is the total cost for the 1,000 stereos?

Department	Allocation Base	Allocation Rate
Purchasing	# of purchase orders	$300 per order
Assembly	# of parts used	$1 per part used
Packaging	# of stereos produced	$5 per stereo produced

Solution

Particulars Per activity Per unit Total Materials 20 20000 Labor 40 40000 Overhead: Purchase orders 300 1500 Assembly 1 20000 Packaging 5 5000 Total costs 86500