Question

Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow: Direct Labor-Hours per unit Annual Production Rims 0.20 21,000 units Posts 0.70 79,000 units Additional information about the company follows: Rims require $19 in direct materials per unit, and Posts require $15. 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 $ 34,760 110 90 200 Special processing Machine-hours $ 136,670 1,000 0 1,000 General factory Direct labor-hours $ 819,000 9,000 54,000 63,000

2. Determine the unit product cost of each product according to the ABC system

Answer 1

Calculate unit product cost under ABC system

	Rims	Posts
Setup	19118	15642
Special processing	136670	0
General factory	117000	702000
Total overhead	272788	717642
Unit	21000	79000
Overhead cost per unit	12.99	9.08
direct material	19	15
Direct labor	3	10.5
Unit product cost	34.99	34.58