Question

Chapter 4 Homework Saved Help Save & Exit Submit Check my work Part 1 of 2 Required information Exercise 4-8 Computing ABC Product Costs (L04-2, LO4-3) The following information applies to the questions displayed below.] Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow: points Skipped Direct Labor-Hours per unit 0.60 0.60 Annual Production 26,000 units 84,000 units Rims Posts eBook Additional information about the company follows: References a. Rims require $17 in direct materials per unit, and Posts require $14. 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 Machine setups Special processing General factory Activity Measure Number of setups Machine-hours Direct labor-hours Estimated Overhead Cost $ 39,480 $ 146,160 $1,092,000 Rims 80 3,000 5,000 Posts Total 320400 3,000 73,000 78,000 Exercise 4-8 Part 1 Required: 1. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Cost Pool Machine setups Special processing General factory Activity Rate per setup per MH per DLH

Answer 1

Solution 1:

Determination of activity rate for each activity
Activity	Estimated Overhead Cost	Activity Base	Usage of Activity Base	Activity Rate
					Machine Setup	$39,480.00	Setups	400	$98.70
Special processing	$146,160.00	Machine hours	3000	$48.72
General factory	$1,092,000.00	Orders	78000	$14.00

Solution 2:

Allocation of overhead and computation of overhead cost per unit
Activity	Estimated Overhead Cost	Activity Base	Usage of Activity Base	Activity Rate	Rims		Posts
					Usage	Allocated Costs	Usage	Allocated Costs
Machine Setup	$39,480.00	Setups	400	$98.70	80	$7,896	320	$31,584
Special processing	$146,160.00	Machine hours	3000	$48.72	3000	$146,160	0	$0
General factory	$1,092,000.00	Orders	78000	$14.00	5000	$70,000	73000	$1,022,000
Total	$1,277,640.00					$224,056		$1,053,584
Nos of units						26000		84000
Overhead cost per unit						$8.62		$12.54

Computation of unit cost of each product - Activity Based costing
Particulars	Rims	Posts
Direct material	$17.00	$14.00
Direct labor	$12.00	$12.00
Manufacturing overhead	$8.62	$12.54
Unit Product Cost	$37.62	$38.54