Bernie Company_Activity Based Costing
Bernie Company makes two products, wheels and pedals and reports the following information:
Direct Labor Hours Per Unit | Annual Production | |
Wheels | 0.8 | 10,000 units |
Pedals | 0.4 | 40,000 units |
Wheels require $12 per unit in direct material, and pedals require $8 per unit in direct material. The direct labor rate for both products is $12 per hour. Wheels require special processing that pedals do not require.
The activity-based costing system used by Bernie reflects the following cost pools identified by the company:
Activity Cost Pool | Est. Overhead Costs | Activity | Total | |
Wheels | Pedals | |||
Number of machine setups | $72,000 | 100 | 300 | 400 |
Machine hours/special processing | $200,000 | 5,000 | 0 | 5,000 |
General overhead (direct labor hours) | $816,000 | 8,000 | 16,000 | 24,000 |
Compute the activity rate for each activity cost pool. What is the unit cost of wheels, and what is the unit cost of pedals?
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Rating:
/5
Solution: Bernie Company_Activity Based Costing