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	18,000	units
Sprockets	0.30	44,000	units

Additional information about the company follows:

1. Hubs require $30 in direct materials per unit, and Sprockets require $12.

2. The direct labor wage rate is $16 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)	$	23,760	120	96	216
Special processing (machine-hours)	$	236,500	4,300	0	4,300
General factory (organization-sustaining)	$	131,400	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 per setup Special processing per MH

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2

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.)

	Hubs Sprockets Direct materials Direct labor Overhead Unit cost

Answer 1

Answer

• [1]

Activity Cost Pool	Overhead cost	Total Activity	Activity Rate
	[A]	[B]	[C = A/B]
Machine setups	$23,760	216	$110.000	per setup
Special processing	$236,500	4300	$55.00	per MH

• [2]

	Hubs		Sprockets
	Answer	Working	Answer	Working
Direct materials	$                 30.00	[given]	$                        12.00	[given]
Direct labor	$                 11.20	0.70 DLHs x $ 16	$                         4.80	0.30 DLHs x $ 16
Overhead	$                 13.87	[ (120 x$ 110) + (4300 x $55)]/18000 units]	$                         0.24	[ (96 x $ 110) / 44000]
Unit cost	$                 55.07		$                        17.04