Question

Data for the 2 products produced:

Labor- Hours per Annual Unit 0.70 14,000units Hubs Sprockets 0.30 41,000units Additional information about the company follows: a. Hubs require $25 in direct materials per unit, and Sprockets require $14 b. The direct labor wage rate is $18 per hour c. Hubs require special equipment and are more complex to manufacture than Sprockets. d. The ABC system has the following activity cost pools Activit Estimated Overhead Activity Cost Pool (Activity Measure) Machine setups (number of setups) Special processing (machine-hours) General factory (organization- sustaining) Cost Hubs s 30,375 135 108 243 0 4,000 NA NA 두 140,000 4,000 108, 200 NA Required: 1 Compute the activity rate for each activity cost pool Determine the unit product cost of each product according to the ABC system.

Answer 1

Computation of Activity rate for each activity
	Machine Setup		Special processing
Activity	No. of setup	Allocated cost	Machine Hour	Allocated cost
Hub	135	$16,875.00	4000	$140,000.00
Sprocket	108	$13,500.00	0	$0.00
Total	243	$30,375.00	4000	$140,000.00
Computaion of Unit product Cost of each product
	Hubs	Sprocket
Annual production	14000 Unit	41000 Unit
Material	$350,000.00	$574,000.00
Direct Wages	$176,400.00	$221,400.00
( 0.70*14000*18) ( 0.30*41000*18)
Activity Cost
Machine Setup	$16,875.00	$13,500.00
Special Processing	$140,000.00
Total Cost per Product	$683,275.00	$808,900.00
Cost /unit	$48.81	$19.73
Note: General factory ( Orginaztion-Suistaining ) cost can not be allocated on each prroduct.