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 16,000 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 | 16,000 | units |
Sprockets | 0.40 | 47,000 | units |
Additional information about the company follows:
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Hubs require $27 in direct materials per unit, and Sprockets require $13.
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The direct labor wage rate is $10 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) | $ | 28,080 | 130 | 104 | 234 |
Special processing (machine-hours) | $ | 144,000 | 4,800 | 0 | 4,800 |
General factory (organization-sustaining) | $ | 125,600 | NA | NA | NA |
Required:
1. Compute the activity rate for each activity cost pool.
Activity Cost Pool | Activity Rate | |
Machine setups | per setup | |
Special processing | per MH |
2. Determine the unit product cost of each product according to the ABC system.
Hubs | Sprockets | |
Direct materials | ||
Direct labor | ||
Overhead | ||
Unit cost |
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