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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


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.

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