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 $10.80 per unit, while product b has been assigned $3.60 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 driver driver consumption
machine setup $ 360,000
setup hours 4,000
materials handling 100,000
pounds of materials 20,000
electric power 40,000
kilowatt-hours 40,000
the following cost information pertains to the production of a and b, just two of its many products:
a b
number of units produced 4,000 20,000
direct materials cost $ 42,000 $ 54,000
direct labor cost $ 24,000 $ 40,000
number of setup hours 400 200
pounds of materials used 1,000 3,000
kilowatt-hours 2,000 4,000
required: 1. use activity-based costing to determine a unit cost for each product.
Answers: 3
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