Question

Required information

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Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow:

   

	Direct Labor-Hours per unit	Annual Production
Rims	0.30	28,000 units
Posts	0.60	76,000 units

Additional information about the company follows:

1. Rims require $17 in direct materials per unit, and Posts require $15.
2. The direct labor wage rate is $15 per hour.
3. Rims are more complex to manufacture than Posts and they require special equipment.
4. 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	$	30,400	120	280	400
Special processing	Machine-hours	$	145,160	2,000	0	2,000
General factory	Direct labor-hours	$	728,000	9,000	47,000	56,000

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

Answer---------

	Rims	Posts
Unit cost	$                    31.19	$                 32.32

Working

ABC Costing
	Rims	Posts
Direct material	$         476,000.00	$ 1,140,000.00
Direct labor	$         126,000.00	$      684,000.00
Overheads	$         271,280.00	$      632,280.00
Total Cost per unit	$         873,280.00	$ 2,456,280.00
Total Units	28000	$        76,000.00
Unit cost	$                    31.19	$                 32.32

.

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Machine setups	Number of setup	$        30,400.00	400	$          76.00	Per setup
Special processing	Number of Machine hour	$      145,160.00	2000	$          72.58	Per Machine hour
General factory	Number of Direct labor hour	$      728,000.00	56000	$          13.00	Per Direct labor hour

.

Cost assigned to Rims
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Machine setups	$                     76.00	120.00	$       9,120.00
Special processing	$                     72.58	2000	$    145,160.00
General factory	$                     13.00	9000	$    117,000.00
Total Overheads assigned			$    271,280.00

.

Cost assigned to Posts
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Machine setups	$                     76.00	280	$      21,280.00
Special processing	$                     72.58	0	$                 -
General factory	$                     13.00	47000	$    611,000.00
Total Overheads assigned			$    632,280.00