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

Question

Fogerty Company makes two products, titanium Hubs and Sprockets. Data regarding the two products follow Direct Labor Hours per Unit 0.80 0.40 Annual Hubs Sprockets Production 11,000 units 50,000 units Additional information about the company follows a. Hubs require $23 in direct materials per unit, and Sprockets require $15 b. The direct labor wage rate is $18 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) Machine setups (number of setups) Special processing (machine-hours) General factory (organization-sustaining) Overhead Cost Hubs Sprockets . Total 144 4,400 NA 80 $ 19,440 $ 154,000 4,400 $ 228,800 64 NA NA

Explanation / Answer

STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL Activity Total Expected Activity ACTIVITY COST POOL Measures Overheads Activity Rate Machine Setup Setups 19,440 144 135.00 Special processing machine Hours 154,000 4,400 35.00 Overhead assigned HUBS SPROCKET Activity rate Activity OH Activity OH machine setup 135 80 10800 64 8640 Special processing 35 4400 154000 0 0 Total Overheads 164800 8640 Divide: Number of units 11000 50000 OH cost per unit 14.98182 0.1728 UNIT COSt HUBS SPROCKET Material Cost 23 15 labour cost 14.4 7.2 OH cost 14.98 0.173 Units cost per unit 52.38 22.373

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