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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 th allocation system, product A has been assigned overhead of $21.86 per unit, while product B has been assigned $13.35 per unit. Management feels that an ABC system will prov and has collected the following cost pool and cost driver information: ide a more accurate allocation of the overhead costs Ac tivity Driver Consumption 4,000 14,000 36, 000 Activity Costs Cost Drivers Cost Pools Machine setup Materials handling Electric power $284,000 Setup hours 70,000 Pounds of materials 72,000 Kilowatt-hours g cost information pertains to the production of A and B,just two of Hakaras many products: Number of units produced Direct materials cost Direct labor cost Number of setup hours Pounds of materials used Kilowatt-hours 5,000 10,000 $24,000 $34,000 $32,000 $35,000 200 2,000 2,000 2,000 4,000 100 Required 1. Use activity-based costing to determine a unit cost for each product. (Round your final answers to 2 decimal pl Cost per Unit Product A Product B
Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under th allocation system, product A has been assigned overhead of $21.86 per unit, while product B has been assigned $13.35 per unit. Management feels that an ABC system will prov and has collected the following cost pool and cost driver information: ide a more accurate allocation of the overhead costs Ac tivity Driver Consumption 4,000 14,000 36, 000 Activity Costs Cost Drivers Cost Pools Machine setup Materials handling Electric power $284,000 Setup hours 70,000 Pounds of materials 72,000 Kilowatt-hours g 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 5,000 10,000 $24,000 $34,000 $32,000 $35,000 200 2,000 2,000 2,000 4,000 100 Required 1. Use activity-based costing to determine a unit cost for each product. (Round your final answers to 2 decimal pl Cost per Unit Product A Product B
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ReportAnswer #1

Answer:

Cost per unit

Product -A

15.42

Product -B

10.12

Working note for the above answer is as under:

Cost Pool

Activity cost$

Cost Driver

Driver consumption

Activity rate  

A

B

C=A/B

Machine set up

284000

Set up Hrs

4000

71

Materials handling

70,000

Pounds of material

14000

5

Electric Power

72,000

Kilowatt Hrs

36000

2

Overhead allocation to A &B

A

B

Cost Driver

Activity rate  

Driver cosumption

OH amount allocated

Driver cosumption

OH amount allocated

A

B

C=A*B

D

E=A*D

Set up Hrs

71

100

7100

200

14200

Pounds of material

5

2000

10000

2000

10000

Kilowatt Hrs

2

2000

4000

4000

8000

Total

21100

32200

Details

Product A

Product B

No Of units produced (A)

5,000

10,000

Cost Details

Direct Materials cost(B)

24000

34000

Direct Labor cost ©

32000

35000

Manufacturing overhead allocated   (D)

21100

32200

Total Cost(E=B+C+D)

77100

101200

Unit Cost =(E/A)

15.42

10.12

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