Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow:
Direct Labor-Hours per unit Annual Production
Rims 0.60 22,000 units
Posts 0.20 80,000 units
Additional information about the company follows:
a. Rims require $14 in direct materials per unit, and Posts require $10.
b. The direct labor wage rate is $15 per hour.
c. Rims are more complex to manufacture than Posts and they require special equipment.
d. The ABC system has the following activity cost pools:

Activity Cost Pool Activity Measure Estimated Overhead Cost Rims Posts Total
Machine setups Number of setups $27,200 120 280 400
Special processing Machine-hours $130,400 5,000 0 5,000
General factory Direct labor-hours $1,056,000 5,000 61,000 66,000

Required:
1. Compute the activity rate for each activity cost pool.
Activity Cost Pool Activity Rate
Machine setups ___ per setup
Special processing _ per MH
General factory ___ per DLH

2. Determine the unit product cost of each product according to the ABC system.

[tex]\left[\begin{array}{ccccc}$Activity&$Driver&$cost&$Total&$Rate\\$Machine Setups&setups&27200&400&68\\$Special processing&machine-hours&130400&5000&26.08\\$General factory&labor-hours&1053000&66000&15.95\\\end{array}\right][/tex]

Then, we solve for the total overhead allocated:

[tex]\left[\begin{array}{cccccc}Activity&Posts&Rims&Allocate Rims&Allocate Posts\\Machine Setups&280&120&8160&19040\\Special processing&0&5000&130400&0\\General factory&61000&5000&79772.73&973227.27\\Total&&&218332.73&992267.27\\\end{array}\right][/tex]

We now divide by the amount produced to get the manufacting overhead per unit.

218,332.73 / 22,000 = 9.924215‬ = 9.92

992,267.27 / 80,000 = 12,403340 = 12.40

Now, we calcualte labor per unit:

0.6 x $15 = 9

0.2 x $15 = 3

Rims unit cost:

14 materials + 9 labor + 9.92 overhead = 32.92

Posts:

10 materials + 3 labor + 12.40 overhead = 25.40