Determine the unit product cost of each product according to the ABC system. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow:
| Direct Labor-Hours per unit |
Annual Production |
|
| Rims | 0.40 | 18,000 units |
| Posts | 0.70 | 77,000 units |
Additional information about the company follows:
- Rims require $14 in direct materials per unit, and Posts require $11.
- The direct labor wage rate is $15 per hour.
- Rims are more complex to manufacture than Posts and they require special equipment.
- The ABC system has the following activity cost pools:
| Estimated Activity | ||||||
| Activity Cost Pool | Activity Measure | Estimated Overhead Cost |
Rims | Posts | Total | |
| Machine setups | Number of setups | $ | 30,030 | 120 | 80 | 200 |
| Special processing | Machine-hours | $ | 147,840 | 2,000 | 0 | 2,000 |
| General factory | Direct labor-hours | $ | 576,000 | 7,000 | 29,000 | 36,000 |
2. Determine the unit product cost of each product according to the ABC system. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
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