E5-28) 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 Machine setup Materials handling Electric power Activity Costs $360,000 100,000 40,000 Cost Drivers Setup hours Number of units produced Direct materials cost Direct labor cost Number of setup hours Pounds of materials used Kilowatt-hours Pounds of materials Kilowatt-hours The following cost information pertains to the production of A and B, just two of Hakara's many products: A 4,000 $ 42,000 $ 24,000 400 1,000 2,000 B 20,000 $ 54,000 $ 40,000 200 3,000 4,000 Activity Driver Consumption Required: 1. Use activity-based costing to determine a unit cost for each product 4,000 20,000 40,000
E5-28) 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 Machine setup Materials handling Electric power Activity Costs $360,000 100,000 40,000 Cost Drivers Setup hours Number of units produced Direct materials cost Direct labor cost Number of setup hours Pounds of materials used Kilowatt-hours Pounds of materials Kilowatt-hours The following cost information pertains to the production of A and B, just two of Hakara's many products: A 4,000 $ 42,000 $ 24,000 400 1,000 2,000 B 20,000 $ 54,000 $ 40,000 200 3,000 4,000 Activity Driver Consumption Required: 1. Use activity-based costing to determine a unit cost for each product 4,000 20,000 40,000
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter3: Cost Behavior
Section: Chapter Questions
Problem 35P: The management of Wheeler Company has decided to develop cost formulas for its major overhead...
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