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: Direct Labor- Hours per Unit Production 0.70 12,000 units 0.30 50,000 units Annual Hubs Sprockets Additional information about the company follows: a. Hubs require $23 in direct materials per unit, and Sprockets require $16 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 $ 20,790 Activity Cost Pool (Activity Measure) Machine setups (number of setups) Special processing (machine-hours) General factory (organization-sustaining) Hubs Sprockets Total 189 84 105 $100,000 4,000 NA. 0 4,000 NA $278,400 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

1 Activity rates Machine setups 110 =20790/189 Special processing 25 =100000/4000 2 Hubs Sprockets Machine setups 11550 9240 Special processing 100000 0 Total overhead 111550 9240 Units 12000 50000 Overhead per unit 9.30 0.18 Hubs Sprockets Direct materials 23 16 Direct labor 11.9 5.1 Overhead 9.30 0.18 Unit product cost 44.20 21.28

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