Question

Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow. Direet Tabora Hours per Anna Production 0.80 27,000 units 0.40 59.000 units Sprockets Additional Information about the company follows: a Hubs require $23 in direct materials per unit, and Sprockets require $12. 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 setupe (number of setups) Special processing machine-hours) General factory organization-sustaining) Estimated Overhead Cost $ 20.250 $ 97,500 316.200 Hubs Sprockets Total 125 100 225 3,900 3.900 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. Complete this question by entering your answers in the tabs below Required 1 Required 2 Compute the activity rate for each activity Activity Cost Pool Activity Rate Machine setups Machine setups per setup Special processing per MH

Answer 1

1	Activity rate for each activity cost pool
	Overhead	Overhead cost	Activity Driver	Driver quantity	Activity driver rate
		A		B	A/B
	Machine Setups	20,250	No of setups	225 setups	90
	Special Processing	97,500	Machine hours	3900 machine hours	25
	General Overheads	163,200	Labour Hours	45200 Labour hours	3.61
2	Calculation of unit product cost using ABC
		Hubs	Sprockets	Total
	Overheads
a	Machine setups	125 setups * $90 per setup	100 setups * $90 per setup
		11,250	9,000	20,250
b	Special Processing	3900 machine hours * $ 25 per machine hour	-
		97,500		97,500
c	General Factory
	(in the absence of information, apportioned using labour hours)
	Labour hours	0.8 * 27000	0.4 * 59000
		21,600	23600	45,200
	Overhead apportionment	77,989	85,211	163,200
d	Total Overheads (a + b +c)	186,739	94,211	280,950
e	No of units	27,000	59,000
	Overhead cost per unit (d/e)	6.92	1.60
	Direct Material per unit	23	12
	Direct Labour per unit	$11 * 0.8 hours per unit	$11 * 0.4 hours per unit
		9	4.4
	Total cost per unit	38.72	18.00