High-Calibre Products Corporation makes two products: titanium rims and posts. D
ID: 2392232 • Letter: H
Question
High-Calibre Products Corporation makes two products: titanium rims and posts. Data regarding the two products follow: Direct Labour Annual Rims Posts Hours per Unit Production 38,000 units 170,000 units 0.60 0.30 Additional information about the company follows a. Rims require $15 in direct materials per unit, and posts require $8 b. The direct labour wage rate is $16 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 Activity Estimated Overheacd Activity Measure Activity Cost Pool Machine setups Special processing General factory Total CostRims Posts $40,320 190 360 7,600 Direct labour-hours $738,000 22,800 51,000 73,800 170 Number of setups Machine-hours $281,200 7,600 Required: 1. Compute the activity rate for each activity cost pool Activity Cost Pool Machine setups Special processing General factory Activity Rate per setup per MH per DLHExplanation / Answer
Answer 1.
Machine Setups:
Activity Rate = Estimated Overhead Cost / Total Activity
Activity Rate = $40,320 / 360
Activity Rate = $112 per setup
Special Processing:
Activity Rate = Estimated Overhead Cost / Total Activity
Activity Rate = $281,200 / 7,600
Activity Rate = $37 per MH
General Factory:
Activity Rate = Estimated Overhead Cost / Total Activity
Activity Rate = $738,000 / 73,800
Activity Rate = $10 per DLH
Answer 2.
Rims:
Overhead Cost allocated = 190 * $112 + 7,600 * $37 + 22,800 * $10
Overhead Cost allocated = $530,480
Unit Cost = Overhead Cost allocated / Number of units produced
Unit Cost = $530,480 / 38,000
Unit Cost = $13.96
Posts:
Overhead Cost allocated = 170 * $112 + 0 * $37 + 51,000 * $10
Overhead Cost allocated = $529,040
Unit Cost = Overhead Cost allocated / Number of units produced
Unit Cost = $529,040 / 170,000
Unit Cost = $3.11
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