Question

Fogerty Company makes two products, titanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor-Hours per Unit 0.70 0.30 Hubs Sprockets Annual Production 11,000 units 46,000 units Additional information about the company follows: a. Hubs require $35 in direct materials per unit, and Sprockets require $19. b. The direct labor wage rate is $14 per hour. c. Hubs are more complex to manufacture than Sprockets and they require special processing d. The company's activity-based absorption costing system has the following activity cost pools: Activity Cost Pool (and Activity Measure) Machine setups (number of setups) Special processing (machine-hours) General factory (Direct labor-hours) Estimated Overhead Cost $ 20,250 $ 171,000 $ 408,500 Expected Activity Hubs Sprockets Total 90 72 162 3,800 0 3,800 7,700 13,800 21,500 Required: 1. Compute the activity rate for each activity cost pool. Activity Cost Pool Activity Rate per Machine setups Special processing General factory setup per MH per DLH 2. Compute the unit product cost for Hubs and Sprockets using activity-based absorption costing.(Do not round intermediate calculations. Round your answers to 2 decimal places.) Hubs Sprockets Direct materials Direct labor Overhead Unit product cost

Answer 1

Ans. 1	*Activity rate =   Estimated overhead / Total expected activity
	Activity cost pool	Estimated overhead (a)	Total expected activity (b)	Activity rates (a/b)
	Machine setups	$20,250	162	setups	$125.00	per setup
	Special processing	$171,000	3800	machine hours	$45.00	Per machine hour
	General factory	$408,500	21500	Direct labor hours	$19.00	Per direct labor hour
Ans. 2		Hubs	Sprockets
	Direct materials	$35.00	$19.00
	Direct labor cost	$9.80	$4.20
	Overhead	$29.87	$5.90
	Unit product cost	$74.67	$29.10
	*Direct materilas per unit is already given.
	*Calculations of Direct labor cost per unit:
	*Direct labor cost per unit = Direct labor hours per unit * Direct labor wages rate
	Hubs	0.70 * $14	$9.80
	Sprockets	0.30 * $14	$4.20
	*Calculations for Overhead cost per unit:
		HUBS	SPROCKETS
	Activity cost pool	Expected activity	Activity rate	Cost	Expected activity	Activity rate	Cost
		per product (a)	(b)	Assigned (a*b)	per product (a)	(b)	Assigned (a*b)
	Machine setups	90	$125	$11,250	72	$125	$9,000
	Special processing	3800	$45	$171,000	0	$45	$0
	General factory	7700	$19	$146,300	13800	$19	$262,200
	Total Manufacturing Overhead		$328,550			$271,200
	*Overhead cost per unit = Total manufacturing overhead / Annual production
	Hubs	$328,550 / 11,000	$29.87
	Sprockets	$271,200 / 46,000	$5.90