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Homework answers / question archive / akara Company has been using direct labor costs as the basis for assigning overhead to its many products
akara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under this allocation system, product A has been assigned overhead of $31.58 per unit, while product B has been assigned $8.69 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information:
Cost pools Activity Costs Cost Drivers Activity Driver Consumption
Machine setup. $198,000 Setup hours 2,000
Materials handling 168,000 Pounds of materials 21,000
Electric power. 40,000 Kilowatt-hours 40,000
The following cost information pertains to the production of A and B, just two of Hakara's many products:
A. B
Number of units produced 4,000 20,000
Direct materials cost $31,000 $33,000
Direct labor cost $33,000 $33,000
Number of setup hours 200 200
Pounds of materials used 1,000 2,000
Kilowatt-hours 4,000 4,000
Required:
1. Use activity-based costing to determine a unit cost for each product. (Round your final answers to 2 decimal places.)
