Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow: 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 in direct materials per unit, and Posts require $10. The direct labor wage rate is $16 per hour. Rims are more complex to manufacture than Posts and they require special equipment. The ABC system has the following activity cost pools: Estimated Activity Activity Cost Pool Activity Measure Estimated Overhead Cost Rims Posts Total Machine setups Number of 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: 1. Compute the activity rate for each activity cost pool.

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02-08-2019
Business

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Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow: 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 in direct materials per unit, and Posts require $10. The direct labor wage rate is $16 per hour. Rims are more complex to manufacture than Posts and they require special equipment. The ABC system has the following activity cost pools: Estimated Activity Activity Cost Pool Activity Measure Estimated Overhead Cost Rims Posts Total Machine setups Number of 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: 1. Compute the activity rate for each activity cost pool.

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andromache andromache · Answer 1 · 2019-08-07T10:14:36+02:00

Answer:

The activity rate for Machine setup, Special Processing, and General Factory is $120 per machine setup, $45 per machine hours, $12 per direct labor hours respectively.

Explanation:

Computation of the activity rate for each activity cost pool is shown below:

1. For Machine setup = Total Machine setup ÷ Number of Setup

= $21600 ÷ 180

= $120 per machine setup

2. For Special Processing = Special Processing ÷ Machine Hours

= $180,000 ÷ 4,000

= $45 per machine hours

3. For General Factory = General factory ÷ Direct labors hours

= $288,000 ÷ $24,000

= $12 per direct labor hours

Hence, the activity rate for Machine setup, Special Processing, and General Factory is $120 per machine setup, $45 per machine hours, $12 per direct labor hours respectively.