Question: Exercise 5-28 Activity-Based Costing [LO 5-2, 5-3] Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products.
Exercise 5-28 Activity-Based Costing [LO 5-2, 5-3]
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 $27.80 per unit, while product B has been assigned $13.23 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 Pools | Activity Costs | Cost Drivers | Activity Driver Consumption | ||||
| Machine setup | $ | 360,000 | Setup hours | 4,000 | |||
| Materials handling | 85,000 | Pounds of materials | 17,000 | ||||
| Electric power | 50,000 | Kilowatt-hours | 25,000 | ||||
The following cost information pertains to the production of A and B, just two of Hakara's many products:
| A | B | |||||
| Number of units produced | 4,000 | 10,000 | ||||
| Direct materials cost | $ | 39,000 | $ | 38,000 | ||
| Direct labor cost | $ | 22,000 | $ | 27,000 | ||
| Number of setup hours | 100 | 200 | ||||
| Pounds of materials used | 2,000 | 2,000 | ||||
| Kilowatt-hours | 2,000 | 4,000 | ||||
Required:
1. Use activity-based costing to determine a unit cost for each product. (Round your final answers to 2 decimal places.)
Product A:
Product B:
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