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 26,000 units 0.30 41,000 units Hubs Sprockets Additional Information about the company follows: a. Hubs require $25 in direct materials per unit, and Sprockets require $20. b. The direct labor wage rate is $18 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 $ 35, 235 $220,000 $116,600 Hubs 145 4,000 NA Sprockets Total 116 261 4,000 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 Special processing Activity Rate per setup per MH

Answer 1

Direct labor Cost per unit = Hubs Sprockets Activity cost pool Machine Set up Special Processing DLH Rate 18 18 Cost poll 35235 220000 * DLH Per Unit 0.70 = 12.6 0.30 = 5.4 / Activity = Activity Rate / 261 = $ 135.00 Per Setup 4000 = $ 55.00 Per MH = = Activity cost Machine Set up Special Processing For Hubs = Activity rate Activity 135 145 = $ 55 4000 = $ Total Activity cost $ 239575 26000 = $ 19,575 2,20,000 2,39,575 9.21 Activity Cost Per Unit = Activity cost Activity cost For Sporkets = Activity rate * Activity = $ 135.00 * 116 = $ Total Activity cost $ $ 15,660 / 41000 = $ 15,660 15,660 0.38 Activity Cost Per Unit Answers Machine Set up Special Processing $ $ Activity Rate 135.00 Per Setup 55.00 Per MH Direct Material The Direct labor) Overhead cost Unit Cost $ $ $ $ Hubs Sprockets 25.00 $ 20.00 12.60 $ 5.40 9.21 $ 0.38 46.81 $ 25.78