Question

High-Calibre Products Corporation makes two products: titanium rims and posts. Data regarding the two products follow: Direct Labour- Hours per Unit Annual Production Rims 0.20 27,000 units Posts 0.10 115,000 units Additional information about the company follows: Rims require $15 in direct materials per unit, and posts require $8. The direct labour wage rate is $13 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 Overhead Cost Activity Activity Cost Pool Activity Measure Rims Posts Total Machine setups Number of setups $31,750 135 115 250 Special processing Machine-hours $280,800 5,400 0 5,400 General factory Direct labour-hours $321,100 5,400 11,500 16,900 Required: 1. Compute the activity rate for each activity cost pool. 2. Determine the unit cost of each product according to the ABC system, including direct materials and direct labour. (Round your intermediate calculations and final answers to 2 decimal places.)

Answer 1

1.

Activity	Activity rate
Machine setups	$127 ($31,750/250)	per setup
Special processing	52 (280,800/5,400)	per machine hour
General factory	19 (321,100/16,900)	per direct labor hour

	Rims	Posts
Machine setups	$17,145 (135*$127)	$14,605 (115*$127)
Special processing	280,800 (5,400*$52)	0
General factory	102,600 (5,400*$19)	218,500 (11,500*$19)
Total overhead costs	$400,545	$233,105

2.

	Rims	Posts
Direct material	$405,000 (27,000*$15)	$920,000 (115,000*$8)
Direct labour	70,200 (5,400*$13)	149,500 (11,500*$13)
Overhead	400,545	233,105
Total costs	$875,745	$1,302,605
Total units	27,000	115,000
Unit product cost	$32.44	$11.33