Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding t
ID: 2412278 • Letter: F
Question
Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow Direct Labor- Hours per Unit Productiorn 0.60 23,000 units 0.20 51,000 units Annual Hubs Sprockets Additional information about the company follows a. Hubs require $39 in direct materials per unit, and Sprockets require $17. b. The direct labor wage rate is $17 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 Activit Estimated Overhead Cost $ 25,515 Activity Cost Pool (Activity Measure) Machine setups (number of setups) Special processing (machine-hours) General factory (organization-sustaining) Hubs Sprockets Total 243 0 3,600 NA 108 135 $162,000 3,600 NA $177,000 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 systemExplanation / Answer
Answer
Total Overheads
Total Activities
Activity rate per cost driver
Machine setup cost
$ 25,515.00
243
$ 105.00
per no. of setups
Special processing cost
$ 1,62,000.00
3600
$ 45.00
per machine hours
General Factory cost
$ 1,77,000.00
NA
NA
Working for allocation to Hubs
Activity rate per cost driver
No. of activity driver
Overhead allocated
Machine setup cost
$ 105.00
per no. of setups
135
$ 14,175.00
Special processing cost
$ 45.00
per machine hours
3600
$ 1,62,000.00
TOTAL Overhead allocated
$ 1,76,175.00
No. of units
23000
Overhead cost per unit
$ 7.66
Working for allocations to Sprockets
Activity rate per cost driver
No. of activity driver
Overhead allocated
Machine setup cost
$ 105.00
per no. of setups
108
$ 11,340.00
Special processing cost
$ 45.00
per machine hours
0
$ -
TOTAL Overhead allocated
$ 11,340.00
No. of units
51000
Overhead cost per unit
$ 0.22
Answer----
Hubs
Sprockets
A
Direct Material
$ 39.00
$ 17.00
B = labor hour per unit x $17
Direct Labor
$ 10.20
$ 3.40
C = allocated above
Overhead cost per unit
$ 7.66
$ 0.22
D = A+B+C
Total Unit product cost as per ABC
$ 56.86
$ 20.62
Total Overheads
Total Activities
Activity rate per cost driver
Machine setup cost
$ 25,515.00
243
$ 105.00
per no. of setups
Special processing cost
$ 1,62,000.00
3600
$ 45.00
per machine hours
General Factory cost
$ 1,77,000.00
NA
NA