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 26,000 units Posts 0.50 70,000 units Additional information about the company follows: Rims require $15 in direct materials per unit, and Posts require $11. The direct labor wage rate is $15 per hour. Rims are more complex to manufacture than Posts and they require special equipment. 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 $ 32,900 60 140 200 Special processing Machine-hours $ 114,800 4,000 0 4,000 General factory Direct labor-hours $ 1,404,000 6,000 72,000 78,000

. 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.)

Answer 1

Solution- Unit production cost of rims: $ 28.45

Unit production cost of posts: $ 37.34

Workings:

Computation of unit product cost under ABC:

	Rims	Posts
	$	$
Direct Material	390,000 ( 26,000 x $ 15)	770,000 ( 70,000 x $ 11)
Direct Labor	117,000 ( 0.30x $ 15 x 26,000)	525,000( 0.50 x $ 15 x 70,000)
Manufacturing Overhead
Machine Setup	9,780 ( $ 32,900 / 200 x 60)	23,030 ( $ 32,900 / 200 x 140)
Special Processing	114,800	0
General Factory	108,000( $ 1,404,000 / 78,000 x 6,000)	12,96,000 ( $ 1,404,000 / 78,000 x 72,000)
Total Production Cost	739,580	26,14,030
Number of units	26,000	70,000
Unit Production Cost	28.45 (739,580/26,000)	37.34 (26,14,030/70,000)