A company makes two products—Product A and B. Data regarding the two products follow: Direct Labor-Hours per Unit Annual Production Product A 0.75 20,000 units Product B 0.50 50,000 units Additional information is as follows: Product A requires $40 in direct materials per unit, and Product B requires $32. The direct labor wage rate is $18 per hour. The company’s activity-based absorption costing system has the following activity cost pools: Activity Cost Pool (and Activity Measures) Estimated Overhead Cost Expected Activity Product A Product B Total Machine setups (number of setups) $ 100,000 100 300 400 Special processing (machine-hours) $ 200,000 2,000 6,000 8,000 General factory (Direct labor-hours) $ 150,000 15,000 25,000 40,000
A company makes two products—Product A and B. Data regarding the two products follow: Direct Labor-Hours per Unit Annual Production Product A 0.75 20,000 units Product B 0.50 50,000 units Additional information is as follows: Product A requires $40 in direct materials per unit, and Product B requires $32. The direct labor wage rate is $18 per hour. The company’s activity-based absorption costing system has the following activity cost pools: Activity Cost Pool (and Activity Measures) Estimated Overhead Cost Expected Activity Product A Product B Total Machine setups (number of setups) $ 100,000 100 300 400 Special processing (machine-hours) $ 200,000 2,000 6,000 8,000 General factory (Direct labor-hours) $ 150,000 15,000 25,000 40,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A company makes two products—Product A and B. Data regarding the two products follow:
Direct Labor-Hours per Unit Annual Production
Product A 0.75 20,000 units
Product B 0.50 50,000 units
Additional information is as follows:
Product A requires $40 in direct materials per unit, and Product B requires $32.
The direct labor wage rate is $18 per hour.
The company’s activity-based absorption costing system has the following activity cost pools:
Activity Cost Pool (and Activity Measures) Estimated Overhead Cost Expected Activity
Product A Product B Total
Machine setups (number of setups) $ 100,000 100 300 400
Special processing (machine-hours) $ 200,000 2,000 6,000 8,000
General factory (Direct labor-hours) $ 150,000 15,000 25,000 40,000
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