Question

Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor- Hours per Annual Unit Production 0.70 13,000 units 0.30 57,000 units Hubs Sprockets Additional information about the company follows: a. Hubs require $24 in direct materials per unit, and Sprockets require $20. b. The direct labor wage rate is $12 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 (organization-sustaining) Estimated Overhead Cost $ 20,250 $144,000 $180, 100 Hubs 90 3,600 NA Sprockets Total 72 162 0 3,600 NA NA

Answer 1

1) Calculate activity rate

Machine setup (20250/162)	125 per setup
Special processing (144000/3600)	40 per MH

2) Calculate unit cost

	Hubs	Sprockets
Direct material	24	20
Direct labor	8.4	3.60
Overhead	11.94	0.16
Unit cost	44.34	23.76