Fogerty Company makes two products—titanium Hubs and Sprockets. Data regarding t

Question

Fogerty Company makes two products—titanium Hubs and Sprockets. Data regarding the two products follow:

Additional information about the company follows:

Hubs require $34 in direct materials per unit, and Sprockets require $13.

The direct labor wage rate is $12 per hour.

Hubs require special equipment and are more complex to manufacture than Sprockets.

The ABC system has the following activity cost pools:

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.

Direct
Labor-Hours per Unit Annual
Production Hubs 0.60 17,000 units Sprockets 0.20 51,000 units

Explanation / Answer

1 Activity rates Machine setups 130 =18720/144 Special processing 50 =210000/4200 2 Hubs Sprockets Machine setups 10400 8320 Special processing 210000 0 Total overhead 220400 8320 Units 17000 51000 Overhead per unit 12.96 0.16 Hubs Sprockets Direct materials 34 13 Direct Labor 7.2 2.4 Overhead 12.96 0.16 Unit product cost 54.16 15.56

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