Fogerty Company makes two products, titanium Hubs and Sprockets. Data regarding
ID: 2470910 • Letter: F
Question
Fogerty Company makes two products, titanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor-Hours per Unit Annual Production Hubs 0.50 19,000 units Sprockets 0.10 56,000 units Additional information about the company follows: a. Hubs require $39 in direct materials per unit, and Sprockets require $16. b. The direct labor wage rate is $16 per hour. c. Hubs are more complex to manufacture than Sprockets and they require special equipment. d. The ABC system has the following activity cost pools: Estimated Activity Activity Cost Pool (Activity Measure) Overhead Cost Hubs Sprockets Total Machine setups (number of setups) $ 28,980 140 112 252 Special processing (machine-hours) $ 230,000 4,600 0 4,600 General factory (organization-sustaining) $ 59,900 NA NA NA Required: 1. Compute the activity rate for each activity cost pool. Activity Cost Pool Activity Rate Machine setups per setup Special processing per MH 2. Determine the unit product cost of each product according to the ABC system. (Round intermediate calculations and final answers to 2 decimal places.) Hubs Sprockets Direct materials Direct labor Overhead Unit cost $0.00 $0.00
Explanation / Answer
ABC costing details Estimated Activity Activity cost pool Overhead Cost Hub Sprockets Tota Activity Activity Rate Cost Allocated to Hub Cost Allocated to Sprocket Total M/C set ups No of set ups 28,980 140 112 252 115 16,100 12,880 Special processing M/C hrs 230,000 4,600 - 4,600 50 230,000 Gen Factory Org sustaining 59,900 - - - Total cost 318,880 246,100 12,880 Units production annually 19,000 56,000 Overhead allocation per unit= $ 12.95 $ 0.23 Unit Productt cost Details Hub Sprockets Direct Materials $ 39.00 $ 16.00 Direct Labor Hours 0.50 0.10 Direct labor wage rate= 16 16 Direct labor cost $ 8.00 $ 1.60 Overhead per unit as per ABC $ 12.95 $ 0.23 Total Production cost /Unit $ 59.95 $ 17.83