Question

 Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow:

 Additional information about the company follows:

 a. Hubs require $22 In direct materials per unit, and Sprockets require $15.

 b. The direct labor wage rate is S17 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:

 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.

Answer 1

(1)

Activity Cost Pool	Estimated OH	Activity	Activity Rate
Machine Setup	$17955	171 setups	$105 per setup
Special Processing	$90000	3600 machine hours	$25 per MH
General factory	$163200	26400 DLH

(2)

	Hubs	Sprockets
DM	$22	$15
DL	(25000 * 0.6 * $17)/25000 =$10.20	(57000 * 0.2 * $17)/57000 =$3.40
Overhead:
Machine Setup	($105 * 95)/25000 =$0.40	($105 * 76)/57000 =$0.14
Special Processing	($25 * 3600)/25000 =$3.60	-
General	($92727/25000) =$3.71	(70473/57000) =$1.24
Cost per unit	$39.91	$19.78

General factory for Hubs = $163200 * 15000/26400 = $92727

General factory for Sprockets = $163200 * 11400/26400 = $70473