Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding t
ID: 2535635 • Letter: F
Question
Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor- Hours per Unit Production 0.80 28,000 units 0.40 56,000 units Annual Hubs Sprockets Additional information about the company follows a. Hubs require $22 in direct materials per unit, and Sprockets require $17 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 Activit Estimated Overhead Cost $ 18,000 Activity Cost Pool (Activity Measure) Machine setups (number of setups) Special processing (machine-hours) General factory (organization-sustaining) Hubs Sprockets Total 180 100 $175,500 3,900 NA 80 0 3,900 NA $246,400 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.Explanation / Answer
Hubs
Sprockets
Direct Material
$22.00
$17.00
Direct Labor
$9.60
$4.80
Overhead
$6.63
$0.14
Un it Cost
$38.23
$21.94
(a)Compute the activity for each cost pool.
Activity Cost Pool
(a)Estimated Overhead Cost
(b)ExpectedActivity
(a) ÷ (b)
ActivityRateMachine
Machine setups
18000
180 setup
100 per setup
Special processing
175500
3900 MH
45 per MH
General factory
246400
0 DLH
0 per DLH
(b) Determine the unit cost of each product according to the ABC system, including direct materials and direct labor
Hubs
Activity Cost Pool
(a)Activity Rate
(b)Activity
(a) × (b)ABC Cos
Machine setups
100 per setup
100
10000
Special processing
45 per MH
3900
175500
General factory
0 per DLH
0
0
Total
185500
Sprockets:
Activity Cost Pool
(a)Activity Rate
(b)Activity
(a) × (b)ABC Cos
Machine setups
100 per setup
80
8000
Special processing
45 per MH
0
0
General factory
0 per DLH
0
0
Total
8000
Hubs
Sprockets
Direct materials
22.00
17.00
Direct labor:
$12 per DLH × 0.80 DLHs per unit
9.60
$12 per DLH × 0.40 DLHs per unit
4.80
Overhead:
$ 185500 ÷ 28000 units
6.63
$ 8000 ÷ 56000 units
0.14
Unit cost
38.23
21.94
Hubs
Sprockets
Direct Material
$22.00
$17.00
Direct Labor
$9.60
$4.80
Overhead
$6.63
$0.14
Un it Cost
$38.23
$21.94