Question

Fogerty Company makes two products—titanium Hubs and Sprockets. Data regarding the two products follow:

	Direct Labor-Hours per Unit	Annual Production
Hubs	0.70	11,000	units
Sprockets	0.30	43,000	units

Additional information about the company follows:

1. Hubs require $23 in direct materials per unit, and Sprockets require $13.

2. The direct labor wage rate is $18 per hour.

3. Hubs require special equipment and are more complex to manufacture than Sprockets.

4. 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)	$	16,560	80	64	144
Special processing (machine-hours)	$	220,000	4,400	0	4,400
General factory (organization-sustaining)	$	227,000	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.

Compute the activity rate for each activity cost pool.

req 1

	Activity Cost Pool Activity Rate Machine setups per setup Special processing per MH

Determine the unit product cost of each product according to the ABC system. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

req 2

	Hubs Sprockets Direct materials Direct labor Overhead Unit cost

Answer 1

Activity Cost Pool Machin Setup (16560/144) Special Processing (220000/4400) Activity Rate 115 Per Setup 50 Per MH $ Sprockets Hubs Total Ovehead Cost Assigned Machine Setup (Rate * setups) 9200 7360 Special Processing (Rate* Machine Hours) 220000 Total Oveheads 229200 7360 Ovehead cost per unit (OV/ Units) 20.84 0.17 Determine the Unit Product Cost Hubs Sprockets Direct Material 13.00 23.00 The Direct labor(18*0.70), (18*0.30) 12.60 5.40 Overhead cost 0.17 20.84 Unit Cost 56.44 18.57