Hakara Company has been using direct labor costs as the basis for assigning over

Question

Hakara 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 $21.54 per unit while product B has been assigned $12.77 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 194,000 Setup hours Machine setup Materials handling 75,000 Pounds of materials 0,000 Kilowatt-hours 2,000 15,000 30,000 Electric power The following cost information pertains to the production of A and B, just two of its many products Number of units produced Direct materials cost Direct labor cost Number of setup hours Pounds of materials used Kilowatt-hours 5,000 10,000 $24,000 $34,000 $30,000$42,000 100 2,000 2.000 2,0002,000 100 Required 1. Úse activity-based costing to determine a unit cost for each product. (Round your final answers to 2 decimal places.) Cost per Unit Product A Product EB 9469 24

Explanation / Answer

Calculate cost per unit

Product A Product B Direct material 24000 34000 Direct labour 30000 42000 Setup cost (194000/2000*100) = 9700 9700 Material handling (75000/15000*2000) = 10000 10000 Electric power (60000/30000*2000) = 4000 4000 Total cost 77700 99700 Unit 5000 10000 Cost per unit 15.54 9.97

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