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
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 $26.87 per unit, while product B has been assigned $7.62 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information:
Cost PoolsActivity CostsCost DriversActivity Driver ConsumptionMachine setup$ 415,000Setup hours5,000Materials handling120,000Pounds of materials15,000Electric power44,000Kilowatt-hours22,000The following cost information pertains to the production of A and B, just two of Hakara's many products:
ABNumber of units produced5,00020,000Direct materials cost$ 22,000$ 26,000Direct labor cost$ 39,000$ 37,000Number of setup hours200200Pounds of materials used2,0002,000Kilowatt-hours4,0004,000Required:
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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