Question

Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow:

   

	Direct Labor-Hours per unit	Annual Production
Rims	0.30	27,000 units
Posts	0.50	75,000 units

Additional information about the company follows:

1. Rims require $12 in direct materials per unit, and Posts require $10.
2. The direct labor wage rate is $20 per hour.
3. Rims are more complex to manufacture than Posts and they require special equipment.
4. The ABC system has the following activity cost pools:

		Estimated Activity
Activity Cost Pool	Activity Measure	Estimated Overhead Cost		Rims	Posts	Total
Machine setups	Number of setups	$	30,000	100	50	150
Special processing	Machine-hours	$	121,500	6,000	0	6,000
General factory	Direct labor-hours	$	756,000	9,000	45,000	54,000

Exercise 4-8 Part 1

Required:

1. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)

Machine Setups. per setup

Special Processing per MH

General Factory per DLH

Determine the unit product cost of each product according to the ABC system. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

Unit product cost of rims

unit product cost of posts

Answer 1

	Requirement 1:
	Computation of Activity Rate for each Activity Cost Pool:
	Activity Cost Pool	Activity Measure	Estimated Overhead Cost (A)	Activity Level (B)	Activity Rate (A/B)
	Machine Setups	Number of Setups	$30,000	150	$200
	Special Processing	Machine Hours	$121,500	6,000	$20.25
	General Factory	Direct Labor Hours	$756,000	54,000	$14
			$907,500
	Machine Setups	$200	per Setup
	Special Processing	$20.25	per MH
	General Factory	$14	per DLH
	Computation of Unit Product Cost using ABC System:
	Allocation of Overhead Costs to Products:
			Rims	Posts
	Activity Cost Pool	Activity Rate (A)	Activity Level (B)	Allocated Cost (A*B)	Activity Level (C)	Allocated Cost (A*C)
	Machine Setups	$200	100	$20,000	50	$10,000
	Special Processing	$20.25	6,000	$121,500	0	0
	General Factory	$14	9,000	$126,000	45,000	$630,000
				$267,500		$640,000
	Computation of Unit Costs:
		Rims	Posts
A	Overhead Costs Allocated	$267,500	$640,000
B	Annual Production	27,000	75,000
C	Unit Overhead Cost (A/B)	$9.907407407	$8.533333333
D	Material Cost per unit	$12	$10
E	Direct Labor Hours Per unit	0.30	0.50
F	Direct Labor Wage Rate Per Hour	$20	$20
G	Direct Labor Wage Rate per unit (E*F)	$6	$10
H	Unit Product Cost (C+D+G)	$27.907407407	$28.53333333
	Unit Product Cost of Rims	$27.91
	Unit Product Cost of Posts	$28.53