Question

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	20,000 units
Posts	0.60	84,000 units

Additional information about the company follows:

1. Rims require $16 in direct materials per unit, and Posts require $12.
2. The direct labor wage rate is $15 per hour.
3. Rims are more complex to manufacture than Posts and they require special equipment.
4. 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	$	28,560	80	130	210
Special processing	Machine-hours	$	159,600	6,000	0	6,000
General factory	Direct labor-hours	$	680,000	10,000	30,000	40,000

Required:

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

	Activity Cost Pool Activity Rate Machine setups per setup Special processing per MH General factory per DLH

Answer 1

		Estimated Activity
Activity Cost Pool	Activity Measure	Estimated Overhead Cost (i)		Rims	Posts	Total activity (ii)	Activity rate (i)/(ii)
Machine setups	Number of setups	$	28,560	80	130	210	28,500/210 = 136 per setup
Special processing	Machine-hours	$	159,600	6,000	0	6,000	159,600/6,000 = 26.6 per MH
General factory	Direct labor-hours	$	680,000	10,000	30,000	40,000	680,000/40,000 = 17 Per DLH

Activity Cost Pool	Activity Rate
Machine setups	136	per setup
Special processing	26.6	per MH
General factory	17	per DLH

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