Question

Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow. Direct Labor- Hours per Annual Unit Production 0.50 18.000 units 0.10 47.000 units Hub Sprockets Additional Information about the company follows: a. Hubs require $33 In direct materials per unit, and Sprockets require $18. b. The direct labor wage rate is $11 per hour. c. Hubs require special equipment and are more complex to manufacture than Sprockets. d. The ABC system has the following activity cost pools: Activity Activity Cost Pool (Activity Measure) Machine setups number of setups) Special processing machine-hours) General factory (organisation-sustaining) Estimated Overhead Cost $ 20,250 $172,000 $ 60,700 Hubs Sprockets Total 125 100 225 4,300 0 4,300 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the activity rate for each activity cost pool. Activity Cost Pool Activity Rate Machine setups Special processing setup per MH

Answer 1

1) Activity rate

Machine setups = 20250/225 = 90 per setup

Special processing = 172000/4300 = 40 per MH

2) Calculate unit product cost

	Hubs	Sprocket
Machine setup	11250	9000
Special processing	172000	0
Total overhead	183250	9000
Unit	18000	47000
Overhead cost per unit	10.18	0.19
Direct material	33	18
Direct labor	11*.50 = 5.50	1.1
Unit product cost	48.68	19.29