Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding t
ID: 2337468 • Letter: F
Question
Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor- Annual per Unit Production 0.80 20.000 units 0.40 43.000 units Hubs Additional information about the company follows a. Hubs require $33 in direct materials per unit, and Sprockets require $20 b. The direct labor wage rate is $12 per hour C. Hubs require special equipment and are more complex to manufacture than Sprockets d. The ABC system has the following activity cost pools Activity Cost Pool (Activity Measure) Machine setups (number of setups) Cost Hubs Sprockots Total 21,735 105 $189,000 ,200 $ 222,400 NA 189 4,200 NA 84 General NA Required 1. Compute the activity rate for each activity cost pool 2. Determine the unit product cost of each product according to the ABC system. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the activity rate for each activity cost pool Activity Rate Machine setups per MH Required 2>Explanation / Answer
Answer: Requirement 1 The activity rate for each activity cost pool would be as follows: Activity Driver Driver Frequency Cost of Activity Rate per activity Machine Setup Number of Set-up 189 21735 $ 115.00 ($21735/189) Special processing Machine hours 4200 189000 $ 45.00 ($189000/4200) General Factory Direct labor hours 33200 222400 $ 6.70 ($222400/33200) Hubs Driver Frequency Rate per activity Total cost Activity Machine Setup 105 $ 115.00 $ 12,075.00 ($115*105) Special processing 4200 $ 45.00 $ 1,89,000.00 ($45*4200) General Factory 16000 $ 6.70 $ 1,07,180.72 ($6.70*16000) Total cost $ 3,08,255.72 Number of units produced 20,000.00 Cost per unit $ 15.41 (308,255.72/20000) Sprockets Driver Frequency Rate per activity Total cost Activity Machine Setup 84 $ 115.00 $ 9,660.00 ($115*84) Special processing 0 $ 45.00 $ - General Factory 17200 $ 6.70 $ 1,15,219.28 ($6.70*0.4*43000) Total cost $ 1,24,879.28 Number of units produced 43,000.00 Cost per unit $ 2.90 ($124,879.28/43000) Requirement 2 The unit product cost of each product according to the ABC system Particulars Hubs Sprockets Direct material $ 33.00 $ 20.00 Direct labor $ 9.60 (0.8*$12) $ 4.80 (0.4*$12) Overhead cost $ 15.41 $ 2.90 Cost per unit $ 58.01 $ 27.70