Question

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Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor- Hours per Annual Unit Production 0.90 27,000 units 0.50 47,000 units Hubs Sprockets Additional information about the company follows: a. Hubs require $36 in direct materials per unit, and Sprockets require $18. 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 Hubs Activity Cost Pool (Activity Measure) Machine setups (number of setups) Special processing (machine-hours) General factory (organization-sustaining) Estimated Overhead Cost $ 23,625 $189,000 $329,800 105 4,200 NA Sprockets Total 84 189 4,200 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 cost pool. Activity Cost Pool Machine setups Activity Rate per setup per MH Special processing

Answer 1

1.Activity Rate = Overhead Costs/Driver is calculated as follows:

Overhead	Cost	Driver Quantity	Rate/Activity
Machine setups	23,625	189	125
Special Processing	189,000	4,200	45

2.Calculation of cost

	Hubs	Sprockets
Direct material per unit	36	18
Direct Labor per unit	9.9	5.5
Overheads: Activity Rate*Consumption/Number of units	7.49	0.22
Unit product cost	$53.39	$23.72