Question
Fogerty Company makes two productstitanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor-Hours per Unit Annual Production Hubs 0.90 21,000 units Sprockets
Fogerty Company makes two productstitanium Hubs and Sprockets. Data regarding the two products follow:
Direct Labor-Hours per Unit | Annual Production | ||
---|---|---|---|
Hubs | 0.90 | 21,000 | units |
Sprockets | 0.50 | 52,000 | units |
Additional information about the company follows:
Hubs require $36 in direct materials per unit, and Sprockets require $14.
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:
Activity Cost Pool (Activity Measure) | Estimated Overhead Cost | Activity | ||
---|---|---|---|---|
Hubs | Sprockets | Total | ||
Machine setups (number of setups) | $ 19,845 | 105 | 84 | 189 |
Special processing (machine-hours) | $ 210,000 | 4,200 | 0 | 4,200 |
General factory (organization-sustaining) | $ 226,900 | 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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