Question

Additional information about the company follows: a.Hubs require $29 in direct materials per unit, and Sprockets require $12. b.The direct labor wage rate is $10 per hour. c.Hubs are more complex to manufacture than Sprockets and they require special equipment. d.The ABC system has the following activity cost pools: Estimated Activity Activity Cost Pool (Activity Measure) Overhead Cost Hubs Sprockets Total Machine setups (number of setups) $ 27,945 115 92 207 Special processing (machine-hours) $ 236,500 4,300 0 4,300 General factory (organization-sustaining) $ 74,000 NA NA 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.

Answer 1

Answer:

Results are below.

Explanation:

First, we need to calculate the predetermined overhead rate for each activity:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Machine setups=  27,945/207= $135 per set up

Special processing= 236,500/4,300= $55 per machine hour

Now, we can allocate costs to each product:

Hubs:

Machine setups=  135*115= $15,525

Special processing= 55*4,300= $236,500

Total= $252,025

Sprockets:

Machine setups= 135*92= $12,420

We weren't provided with enough information to calculate the unitary cost. Information regarding direct labor hours and the number of units is missing.