Question

Direct Labor- Hours per Unit 0.70 0.30 Hubs Sprockets Annual Production 18,000 units 53,000 units Additional information about the company follows: a. Hubs require $38 in direct materials per unit, and Sprockets require $16. b. The direct labor wage rate is $17 per hour. C. Hubs are more complex to manufacture than Sprockets and they require special processing. d. The company's activity-based absorption costing system has the following activity cost pools: Estimated Overhead Expected Activity Cost Hubs 30 Activity Cost Pool (and Activity Measure) Machine setupe (number of setupa) Special processing (machine-hours) General factory (Direct labor-hours) $ 15,840 $ 120,000 $ 370,500 4,800 12,600 Sprockets 64 0 15,900 Total 144 4 .800 28,500 Required: 1. Compute the activity rate for each activity cost pool. 2. Compute the unit product cost for Hubs and Sprockets using activity-based absorption costing. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the activity rate for each activity cost pool Activity Cost Pool Activity Rate Machine setups per setup Special processing per MH Generator Required 2 >

Answer 1

1
	Activity rate
Machine setups	110	per setup	=15840/144
Special processing	25	per MH	=120000/4800
General factory	13	per DLH	=370500/28500
2
	Hubs	Sprockets
Machine setups:
110 X 80	8800
110 X 64		7040
Special processing	120000	0
General factory:
13 X 12600	163800
13 X 15900		206700
Total overhead	292600	213740
Divide by units	18000	53000
Overhead per unit	16.26	4.03
	Hubs	Sprockets
Direct materials	38.00	16.00
Direct labor	11.90	5.10
Manufacturing Overhead	16.26	4.03
Unit product cost	66.16	25.13