Reference no: EM132536260
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 $23.18 per unit, while product B has been assigned $9.84 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 $426,000 Setup hours 6,000
Materials handling 171,000 Pounds of materials 19,000
Electric power 54,000 Kilowatt-hours 27,000
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 5,000 10,000
Direct materials cost $37,000 $28,000
Direct labor cost $24,000 $25,000
Number of setup hours 100 100
Pounds of materials used 1,000 1,000
Kilowatt-hours 2,000 2,000
Required:
Question 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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