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 \$28.26 per unit, while product B has been assigned \$11.09 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 Activity Costs Cost Drivers Activity Driver Consumption Machine setup \$ 128,000 Setup hours 2,000 Materials handling 84,000 Pounds of materials 14,000 Electric power 33,000 Kilowatt-hours 33,000

The following cost information pertains to the production of A and B, just two of Hakara's many products:

 A B Number of units produced 4,000 10,000 Direct materials cost \$ 36,000 \$ 25,000 Direct labor cost \$ 34,000 \$ 36,000 Number of setup hours 100 200 Pounds of materials used 1,000 1,000 Kilowatt-hours 2,000 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 for:

Product A.

Product B.

• Requirement 1 with working
 Product A Product B Direct Material Cost \$36,000 \$25,000 Direct Labor Cost \$34,000 \$36,000 Machine setup cost \$6,400 \$12,800 Material handling cost \$6,000 \$6,000 Electric power cost \$2,000 \$4,000 Total Cost \$84,400 \$83,800 Total Units 4000 10000 Unit Cost \$21.10 \$8.38

--Working

 Product A Product B Direct Material Cost 36000 25000 Direct Labor Cost 34000 36000 Machine setup cost =(128000/2000)*100 =(128000/2000)*200 Material handling cost =(84000/14000)*1000 =(84000/14000)*1000 Electric power cost =(33000/33000)*2000 =(33000/33000)*4000 Total Cost \$84,400 \$83,800 Total Units 4000 10000 Unit Cost \$21.10 (\$84400 / 4000) \$8.38 (\$83800 / 1000)

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