Question

[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: Direct Labor-Hours per unit Annual Production Rims 0.50 25,000 units Posts 0.80 88,000 units Additional information about the company follows: Rims require $19 in direct materials per unit, and Posts require $17. 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 $ 26,400 70 430 500 Special processing Machine-hours $ 163,680 4,000 0 4,000 General factory Direct labor-hours $ 500,000 3,000 47,000 50,000 Exercise 4-8 Part 2 2. 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

2. Determine the unit product cost of each product according to the ABC system. Unit product cost of Rims Unit product cost of Posts $34.40 $34.60 Explanation: Activity Rate Estimated Activity Estimated Activity Rate (A B) Activity Cost Pool Overhead Cost (A) (B) 500 setups 4,000 MHs 50,000 DLHS Machine setups Special processing General factory $52.80 per setup 40.92 per MH 10.00 per DLH $26,400 163,680 500,000 Overhead cost per unit Rims ABC Cost (A x B) $3,696.00 163,680.00 30,000.00 $197,376 25,000 $7.90 Activity Cost Pool Machine setups Special processing General factory Total costs assigned (a) Units produced (b) Overhead cost per unit [(a) - (b)] Activity Rate (B) $52.80 Activity Level (A) 70 4,000 3,000 40.92 10.00

Posts Activity Cost Pool Machine setups Special processing General factory Total costs assigned (a) Units produced (b) Overhead cost per unit [(a) - (b)] ABC Cost (A x B) $22,704.00 0.00 470,000.00 $492,704 88,000 $5.60 Activity Level (A) Activity Rate (B) $52.80 430 0 40.92 47,000 10.00 Unit product cost Rims $19.00 7.50 7.90 $34.40 rials cost ect Direct labor cost (0.50 DLH8 per unit x $15 per DLH) Overhead Cost per unit Posts Direct materials cost Direct labor cost (0.80 DLHS per unit x $15 per DLH) Overhead Cost per unit $17.00 12.00 5.60 $34.60