Question

Exercise 4-8 Computing ABC Product Costs [LO4-2, LO4-3]

[The following information applies to the questions displayed below.]

Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow:

   

	Direct Labor-Hours per unit	Annual Production
Rims	0.70	26,000 units
Posts	0.70	90,000 units

Additional information about the company follows:

Rims require $14 in direct materials per unit, and Posts require $10.

The direct labor wage rate is $18 per hour.

Rims are more complex to manufacture than Posts and they require special equipment.

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	$	42,300	120	80	200
Special processing	Machine-hours	$	162,000	4,000	0	4,000
General factory	Direct labor-hours	$	936,000	4,000	48,000	52,000

Exercise 4-8 Part 1

Required:

1. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)

Exercise 4-8 Part 2

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.)

Answer 1

1
Activity Cost Pool	Activity rate
Machine setups	211.50	per setup	=42300/200
Special processing	40.50	per Machine-hour	=162000/4000
General factory	18.00	per Direct labor-hour	=936000/52000
2
	Rims	Posts
Machine setups	25380	16920
Special processing	162000	0
General factory	72000	864000
Total overhead	259380	880920
Divided by units	26000	90000
Overhead per unit	9.98	9.79
	Rims	Posts
Direct materials per unit	14.00	10.00
Direct labor per unit	12.60	12.60
Overhead per unit	9.98	9.79
Unit product cost	36.58	32.39