# Hakara Company has been using direct labor costs as the basis for assigning overhead to its...

Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under this allocation system, product A has been assigned overhead of \$10.80 per unit, while product B has been assigned \$3.60 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information: Cost Pools Machine setup Materials handling Electric power Activity Costs Cost Drivers \$360,000 Setup hours 100,000 Pounds of materials 40,000 Kilowatt-hours Activity Driver Consumption 4,000 20,000 40,000 The following cost information pertains to the production of A and B, just two of Hakara's many products: А Number of units produced Direct materials cost Direct labor cost Number of setup hours Pounds of materials used Kilowatt-hours B 4,000 20,000 \$42,000 \$54,000 \$24,000 \$40,000 400 200 1,000 3,000 2,000 4,000 Required: 1. Use activity-based costing to determine a unit cost for each product. (Round your answers to 2 decimal places.)
Required: 1. Use activity-based costing to determine a unit cost for each product. (Round your answers to 2 decimal places.) & Answer is not complete. Cost per Unit Product A Product B

Calculation of cost per unit using activity based costing -

 Particulars Calculation Product A Product B I Direct materials Given in question \$42000 \$54000 II Direct labor Given in question \$24000 \$40000 III Machine Setup Product A = (\$360000 / 4000 Setup hours) * 400 Setup hours Product B = (\$360000 / 4000 Setup hours) * 200 Setup hours \$36000 - - \$18000 IV Materials Handling Product A = (\$100000 / 20000 Pounds) * 1000 Pounds Product B = (\$100000 / 20000 Pounds) * 3000 Pounds \$5000 - - \$15000 V Electric Power Product A = (\$40000 / 40000 Kilowatt-hours) * 2000 Kilowatt-hours Product B = (\$40000 / 40000 Kilowatt-hours) * 4000 Kilowatt-hours \$2000 - - \$4000 VI Total Product Cost I + II + III + IV + V \$109000 \$131000 VII Units produced Given in question 4000 units 20000 units Cost per unit VI / VII \$27.25 \$6.55
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