Compute the activity rate for each activity cost pool. What is the unit cost of wheels, and what is the unit cost of pedals?
Payne0517Bernie Company makes two products, wheels and pedals and reports the following information:
| Direct Labor Hours Per Unit | Annual Production |
|
|
|
Wheels | 0.8 | 10,000 units |
Pedals | 0.4 | 40,000 units |
Wheels require $12 per unit in direct material, and pedals require $8 per unit in direct material. The direct labor rate for both products is $12 per hour. Wheels require special processing that pedals do not require.
The activity-based costing system used by Bernie reflects the following cost pools identified by the company:
Activity Cost Pool | Est. Overhead Costs | Activity | Total | |
|
| Wheels | Pedals |
|
Number of machine setups | $72,000 | 100 | 300 | 400 |
Machine hours/special processing | $200,000 | 5,000 | 0 | 5,000 |
General overhead (direct labor hours) | $816,000 | 8,000 | 16,000 | 24,000 |
Compute the activity rate for each activity cost pool. What is the unit cost of wheels, and what is the unit cost of pedals?
12 years ago
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bernie_company_activity_based_costing.xlsx
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