Question

Direct Labor-Hours per unit 0.80 0.60 Rims Posts Annual Production 19,000 units 86,000 units Additional Information about the company follows: a. Rims require $13 in direct materials per unit, and Posts require $9. b. The direct labor wage rate is $15 per hour. c. Rims are more complex to manufacture than Posts and they require special equipment. d. The ABC system has the following activity cost pools: Estimated Activity Activity Cost Pool Machine setups Special processing General factory Activity Measure Number of setups Machine-hours Direct labor-hours Estimated Overhead Cost $39.560 $ 140, 180 $ 532,000 Ris ABO 2,000 3.000 Posts 120 Total 200 2.000 38,000 35.000 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.) Unit product cost of Rims Unit product cost of Posts

Answer 1

Solution 2:

Allocation of overhead and computation of overhead cost per unit
Activity	Estimated Overhead Cost	Activity Base	Usage of Activity Base	Activity Rate	Rims		Posts
					Usage	Allocated Costs	Usage	Allocated Costs
Machine setups	$39,560.00	Nos of setups	200	$197.80	80	$15,824	120	$23,736
Special Processing	$140,180.00	Machine hours	2000	$70.09	2000	$140,180	0	$0
General factory	$532,000.00	Direct labor hours	38000	$14.00	3000	$42,000	35000	$490,000
Total	$711,740.00					$198,004		$513,736
Nos of units						19000		86000
Overhead cost per unit						$10.42		$5.97

Computation of unit cost of each product - Activity Based costing
Particulars	Rims	Posts
Direct material	$13.00	$9.00
Direct labor	$12.00	$9.00
Manufacturing overhead	$10.42	$5.97
Unit Product Cost	$35.42	$23.97