Exercise 5-28 (Algo) Activity-Based Costing [LO 5-2, 5-3]
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 $35.29 per unit, while product B has been assigned $8.25 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 Drivers Activity Driver Consumption
Machine setup $ 261,000 Setup hours 3,000
Materials handling 153,000 Pounds of materials 17,000
Electric power 38,000 Kilowatt-hours 38,000
The following cost information pertains to the production of A and B, just two of Hakara's many products:
A B
Number of units produced 4,000 20,000
Direct materials cost $
37,000
$
27,000
Direct labor cost $
41,000
$
40,000
Number of setup hours 200 200
Pounds of materials used 1,000 2,000
Kilowatt-hours 4,000 2,000
Required:
1. Use activity-based costing to determine a unit cost for each product. (Round your final answers to 2 decimal places.)
Cost per Unit
Product A
Product B