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

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.)

Unit product cost of Rims

Unit product cost of Posts

Answer 1

Answer
RIMS
		working
direct material	320,000	[$16*20000 units]
direct labor	180,000	[$15 per hour*0.60 hour per unit*20000 units]
overhead
machine setups	10880	[(28560/210)*80]
special processing	159,600	[(159600/6000)*6000]
general	170,000	[(680000/40000)*10000]
Total product costs	$840,480
number of units	20000
product cost per unit	$42.02	840480/20000
posts
		working
direct material	1,008,000	[$12*84000 units]
direct labor	756,000	[$15 per hour*0.60 hour per unit*84000 units]
overhead
machine setups	17680	[(28560/210)*130]
special processing	0	[(159600/6000)*0]
general	510,000	[(680000/40000)*30000]
Total product costs	$2,291,680
number of units	84000
product cost per unit	$27.28	2291680/84000