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: Labor- Annual 0.80 0.40 Hubs 26,000 units 44,000 units Additional information about the company follows: a. Hubs require $28 in direct materials per unit, and Sprockets require $10 b. The direct labor wage rate is $17 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: Hubs $ 17,820 110 s 117,000 3,900 NA 198 3,900 NA Machine setups (number of setups) 0 NA $ 302,400 General factory (organization-sustaining) Required 1. Compute the activity rate for each activity cost pool. ctivity Cost Machine setups Special processing Rate per MH

Explanation / Answer

ABC Total cost Total cost driver Cost per driver Machine setups 17820 198 90 Special processing 117000 3900 30 Hubs Sprockets Machine setups 9900 7920 17820 Special processing 117000 0 117000 Total overheads cost 126900 7920 134820 Number of units 26000 44000 Overhead cost per unit 4.88 0.18 Hubs Sprockets Direct material 28 10 Direct labor 13.6 6.8 Overhead 4.88 0.18 Unit cost 46.48 17.0

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