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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?
