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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

Accounting

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.)

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