Comprehensive Problem II Worth 50 points

Part I

Performance Products Corporation makes two products, Titanium Rims and Posts. Data regarding the two products is provided in the following table:

	Direct Labor Hours per Unit	Annual Production
Rims	0.40	20,000 units
Posts	0.20	80,000 units

Additional information about the company follows:

Rims require $17.00 in direct materials per unit, and Posts require $10.00.

The direct labor wage rate is $16.00 per hour.

Rims are more complex to manufacture than Posts, and they require special equipment.

The Activity Based Costing (ABC) System has the following activity cost pools:

Activity Cost Pool	Activity Measure	Estimated Overhead Cost	Rims	Posts	Total Activity for Rims and Posts
Machine Setups	Number of Machine Setups	$21,600	100	80	180
Special Processing	Machine Hours	$180,000	4,000	0	4,000
General Factory	Direct Labor Hours	$288,000	8,000	16,000	24,000

Required - Use the tables on the following page to determine the following required components:

In order to receive full credit please show all work!!

Compute the activity rate for each activity pool.

Determine the amount of manufacturing overhead assigned to each product (Rims and Posts) for each activity cost pool.

Determine the unit product cost of each product (Rims and Posts) according to the ABC system.

1. Compute the activity rate for each activity pool.

Activity Cost Pool	Estimated Overhead Cost	Expected Activity	Activity Rate
Machine Setups
Special Processing
General Factory

2. Overhead is assigned to the two products as follows:

Rims:

Activity Cost Pool	Activity Rate	Activity	ABC Cost
Machine Setups
Special Processing
General Factory
Total Factory Overhead

Posts:

Activity Cost Pool	Activity Rate	Activity	ABC Cost
Machine Setups
Special Processing
General Factory
Total Factory Overhead

Determine the total and unit product cost of each product (Rims and Posts) according to the ABC system.

	Rims	Posts
Direct materials:
Direct labor:
Manufacturing Overhead:
Unit cost

Part II

List and describe the steps (in order) for Implementing Activity Based and Costing.

Identify and describe the limitations of Activity Based Costing.