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	0.60	26,000 units
Posts	0.60	84,000 units

Additional information about the company follows:

1. Rims require $17 in direct materials per unit, and Posts require $14.
2. The direct labor wage rate is $20 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	$	39,480	80	320	400
Special processing	Machine-hours	$	146,160	3,000	0	3,000
General factory	Direct labor-hours	$	1,092,000	5,000	73,000	78,000

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.)

Unit Product cost of rims
Unit Product cost of posts

Answer 1

RIMS

		working
direct material	442,000	[$17*26000units]
direct labor	312,000	[$20 per hour*0.60hour per unit*26000units]
overhead
machine setups	7896	[(39480/400)*80]
special processing	146,160	[(146160/3000)*3000]
general	70,000	[(1092000/78000)*5000]
Total product costs	$978,056	[442000+312000+7896+146160+70000]
number of units	26000
product cost per unit	$37.62	[978056/26000]

posts

		working
direct material	1,176,000	[$14*84000units]
direct labor	1,008,000	[$20 per hour*0.60hour per unit*84000units]
overhead
machine setups	31584	[(39480/400)*320]
special processing	0	[(146160/3000)*0]
general	1,022,000	[(1092000/78000)*73000]
Total product costs	$3237584	[1176000+1008000+31584+1022000]
number of units	84000
product cost per unit	$38.54	[3237584/84000]