Question
Fogerty Company makes two productstitanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor-Hours per Unit Annual Production Hubs 0.60 22,000 units Sprockets
Fogerty Company makes two productstitanium Hubs and Sprockets. Data regarding the two products follow:
Direct Labor-Hours per Unit | Annual Production | ||
---|---|---|---|
Hubs | 0.60 | 22,000 | units |
Sprockets | 0.20 | 51,000 | units |
Additional information about the company follows:
-
Hubs require $21 in direct materials per unit, and Sprockets require $15.
-
The direct labor wage rate is $12 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:
Activity Cost Pool (Activity Measure) | Estimated Overhead Cost | Activity | ||
---|---|---|---|---|
Hubs | Sprockets | Total | ||
Machine setups (number of setups) | $ 24,750 | 110 | 88 | 198 |
Special processing (machine-hours) | $ 215,000 | 4,300 | 0 | 4,300 |
General factory (organization-sustaining) | $ 207,000 | 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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