Ch 3 Questions 2-3 (of 6) [The following information applies to the questions di

Question

Ch 3 Questions 2-3 (of 6) [The following information applies to the questions displayed below Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow Direct Labor-Hours Annual Production Rims Posts 0.40 0.70 18,000 units 77,000 units Additional information about the company follows: a. Rims require $14 in direct materials per unit, and Posts require $11. 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 Estimated Overhead CostRims s 30,030 s 1478402.000 $576.000 7000 120 80 Number of setups Machine-hours 200 2.000 36,000 Special processing Direct labor-hours

Explanation / Answer

STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL Activity Total Expected Activity ACTIVITY COST POOL Measures Overheads Activity Rate Machine Setups Setups 30,030 200 150.15 Per Setup Special Processing MH 147,840 2,000 73.92 Per MH General factory DLH 576,000 36,000 16.00 Per DLH Overheads allocation: Activity Rate RIMS POSTS Activity OH cost Activity OH cost Machine Setups 150.15 120 18018 80 12012 Special Processing 73.92 2000 147840 0 0 General factory 16 7000 112000 29000 464000 TOTAL OVERHEADS 277858 476012 Divide: Number of units 18000 77000 OH cost per unit 15.44 6.18 Req 2. Total Product cost: RIMS POSTS N umber of units 18000 77000 Material cost Rims (18000*14) 252000 Posts (77000*11) 847000 Labour cost Rims (18000*0.4*15) 108000 Posts (77000*0.7*15) 808500 Overheads allocated 277858 476012 Total Product cost 637858 2131512 Divide: Number of units 18000 77000 Unit product cost 35.44 27.68 Unit product cost of RIMS 35.44 Unit product cost of POSTS 27.68

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