1. Korg, Inc makes two products - platinum-based tacks and hinges. Data regardin
ID: 2596565 • Letter: 1
Question
1. Korg, Inc makes two products - platinum-based tacks and hinges. Data regarding the two products follow: Annual Production Direct Labor Hours Per Unit Hinges.... Additional information about the company follows: a. Hinges require $16 in direct materials per unit, and tacks require $9. b. The direct labor wage rate is $10 per hour. c. Hinges require special equipment and are more complex to manufacture than Tacks d. The ABC system has the following cost pools: Estimated Overhead Costs $36,000 $100,000 $408,000 Activity Activity Cost Pool (Activity Measure) Technology preparations (number of setups) Custom processing (machine hours) General factory (organizational sustaining) Hinges Tacks Total 150 200 0 2,500 NA NA 50 2,500 NA Required: 1. Compute the activity rate for each activity cost pool. Did you compute an activity rate for all of the activity cost pools? Why? 2 Determine the unit product cost of each product according to the ABC system.Explanation / Answer
1. Activity rate:
Technology preparations = $36000/ (50+150) = $180
Custom processing = $100000/ 2500 = $40
No, the activity rate for General factory is not computed. The reason being that it is a general activity which does not have a specific and dedicated base for allocation to the products.
2.
Hinges Tacks Direct material cost $16 $9 Direct labor cost0.40 x $10; 0.20 x $10 4 2 Overhead cost: Technology preparations
(180 x 50)/5000;
(180 x 150)/10000 1.8 2.7 Custom processing
2500/ 5000 0.5 0 Unit product cost $22.3 $13.7
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