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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 allocat

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 $30.25 per unit, while product B has been assigned $6.97 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: points eBook Cost Pools Machine setup Materials handling Electric power Activity Costs $310,000 140,000 34,000 Cost Drivers Setup hours Pounds of materials Kilowatt-hours Activity Driver Consumption 5,000 20,000 34,000 Print References The following cost information pertains to the production of A and B, just two of Hakara's many products: Number of units produced Direct materials cost Direct labor cost Number of setup hours Pounds of materials used Kilowatt-hours A B 4,000 20,000 $30,000 $26,000 $41,000 $25,000 200 200 1,000 1,000 4,000 4,000 Required: 1. Use activity-based costing to determine a unit cost for each product. (Round your final answers to 2 decimal places.) Cost per Unit Product A Product B
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ReportAnswer #1
Cost per Unit
Product A $         23.60
Product B $           3.72
Explanation
Cost Pools Activity Costs Cost Driver Units Overhead Rate
Machine setup $ 310,000.00             5,000.00 $          62.00
Materials handling $ 140,000.00           20,000.00 $            7.00
Electric power $   34,000.00           34,000.00 $            1.00
Cost Assignment:
A B
Direct materials $        30,000.00 $ 26,000.00
Direct labor $        41,000.00 $ 25,000.00
Overhead:
Machine setup $62 x 200 $        12,400.00 $62 x 200 $ 12,400.00
Materials handling $7 x 1000 $         7,000.00 $7 x 1000 $ 7,000.00
Electric power $1 x 4000 $         4,000.00 $1 x 4000 $ 4,000.00
Total product cost $        94,400.00 $ 74,400.00
Units produced             4,000.00    20,000.00
Cost per unit $              23.60 $        3.72
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