Question
Fogerty Company makes two productstitanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor-Hours per Unit Annual Production Hubs 0.80 25,000 units Sprockets
Fogerty Company makes two productstitanium Hubs and Sprockets. Data regarding the two products follow:
| Direct Labor-Hours per Unit | Annual Production | |
Hubs | 0.80 | 25,000 | units |
Sprockets | 0.40 | 52,000 | units |
|
Additional information about the company follows:
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Hubs require $29 in direct materials per unit, and Sprockets require $14.
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The direct labor wage rate is $20 per hour.
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Hubs require special equipment and are more complex to manufacture than Sprockets.
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The ABC system has the following activity cost pools:
| Estimated | Activity | |||
Activity Cost Pool (Activity Measure) | Overhead Cost | Hubs | Sprockets | Total | |
Machine setups (number of setups) | $ | 32,625 | 145 | 116 | 261 |
Special processing (machine-hours) | $ | 105,000 | 4,200 | 0 | 4,200 |
General factory (organization-sustaining) | $ | 228,000 | NA | NA | 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.
|
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