Question
Fogerty Company makes two productstitanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor-Hours per Unit Annual Production Hubs 0.70 12,000 units Sprockets
Fogerty Company makes two productstitanium Hubs and Sprockets. Data regarding the two products follow:
Direct Labor-Hours per Unit | Annual Production | ||
Hubs | 0.70 | 12,000 | units |
Sprockets | 0.30 | 42,000 | units |
Additional information about the company follows:
Hubs require $21 in direct materials per unit, and Sprockets require $18.
The direct labor wage rate is $11 per hour.
Hubs require special equipment and are more complex to manufacture than Sprockets.
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) | $ | 15,840 | 80 | 64 | 144 |
Special processing (machine-hours) | $ | 150,000 | 5,000 | 0 | 5,000 |
General factory (organization-sustaining) | $ | 184,800 | 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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