Question

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

   

	Direct Labor-Hours per unit	Annual Production
Rims	0.70	26,000 units
Posts	0.80	90,000 units

   

Additional information about the company follows:

a. Rims require $14 in direct materials per unit, and Posts require $10.

b. The direct labor wage rate is $20 per hour.

c. Rims are more complex to manufacture than Posts and they require special equipment.

d. 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	$	33,300	70	230	300
Special processing	Machine-hours	$	172,800	3,000	0	3,000
General factory	Direct labor-hours	$	858,000	5,000	73,000	78,000

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

	Activity Cost Pool Activity Rate Machine setups per setup Special processing per MH General factory per DLH

1b

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

Answer 1

Answer:-1a)-

Calculation of actvity rate
Activity cost pool	Activity Measure	Estimated overhead cost (a)	Expected activity (b)	Activity rate (c=a/b)
		$		$
Machine set ups	No. of setups	33300	300	111
Special processing	Machine hours	172800	3000	57.6
General factory	Direct labor hours	858000	78000	11
	Total	1064100

1b)-

Performance product Corporation
Product cost
Particulars	Rim	Posts
	$	$
Direct material	26000 units*$14 per unit=364000	90000 units*$10 per unit=900000
Direct labor	26000 units*.70*$20 per unit=36400	90000 units*.80*$20 per unit=1440000
Machine setup cost	$111 per setup*70 setup=7770	$111 per setup*230 setup=25530
Special processing	3000 mhrs*$57.60=172800	Nil
General factory	$11 per DLHs*5000 DLHs=55000	$11 per DLHs*73000 DLHs=803000
Total product cost (a)	963570	3168530
No. of units (b)	26000	90000
Product cost per unit (c=a/b)	37.06	35.21