Problem: Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow:
Direct
Labor-Hours Annual
Per Unit Production
Rims...... 0.40 20,000 units
Posts...... 0.20 80,000 units
Additional information about the company follows:
a) Rims require $17 in direct materials per unit, and Posts require $10.
b) The direct labor wage rate is $16 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
|
|
|
|
|
|
|
Overhead
|
|
Activity
|
|
|
Activity Cost Pool
|
Activity Measure
|
Cost
|
Total
|
Rims
|
Posts
|
|
Machine setups
|
Number of setups
|
$21,600
|
180
|
100
|
80
|
|
Special processing
|
Machine-hours
|
$180,000
|
4,000
|
4,000
|
-
|
|
General factory
|
Direct Labor Hrs
|
$288,000
|
24,000
|
8,000
|
16,000
|
|
|
|
$489,600
|
|
|
|
Required:
- Compute the activity rate (i.e., predetermined overhead rate) for each activity cost pool.
- Determine the unit product cost of each product according to the ABC system, including direct materials and direct labor.