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Question

1Normal 1No Spac Heading 1 Heading 2 Ttle Subtitle Subtle Em... En Styles Paragraph Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow: Labor- Hours per Annual Unit Production 0.60 11,000units Hubs Sprockets 0.20 59,000units Additional information about the company follows: a. Hubs require $28 in direct materials per unit, and Sprockets require $13. b. The direct labor wage rate is $11 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: Estimated Overhead Activity tivity Cost Pool (Activity Measure) Machine setups (number of setups) Special processing (machine-hours) General factory (organization sustaining) Cost Hubs Sprockets Total 21,375 95 s 132,000 4,400 76 171 0 4,400 NA NA s 230, 800 NA Required: 1. Compute the activity rate for each activity cost pool 2. Determine the unit product cost of each product according to the ABC system.

Explanation / Answer

Solution:

From the given data we need to find the given requirements.

Answer 1. Computing the activity rate for each activity cost pool:

Answer 2. Computing the unit product cost of each product according to ABC system:

Activity cost pool Calculations Activity rate Machine setups 21,375 /171 $125 per setup Special processing 132,000 /4,400 $30 per MH

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