Question

Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor- Hours per Annual Unit Production 8.70 12,000 units 0.30 55,000 units Hubs Sprockets Additional information about the company follows: a. Hubs require $22 in direct materials per unit, and Sprockets require $14. b. The direct labor wage rate is $17 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 $ 24,840 $112,500 $222,900 Hubs Sprockets Total 96216 @ 4,500 4,500 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

Answer 1

1) Activity rate :

Machine setup = 24840/216 = 115 per setup

Special processing = 112500/4500 = 25 per machine hour

2) Calculate unit product cost

	Hubs	Sprocket
Machine setup	13800	11040
Special processing	112500	0
Total overhead	126300	11040
Unit	12000	55000
Overhead cost per unit	10.53	0.20
Direct material	22	14
Direct labor	11.90	5.10
Unit product cost	44.43	19.30