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 25,000 units 42,000 units Additional information about the company follows: a. Hubs require $26 in direct materials per unit, and Sprockets require $19. b. The direct labor wage rate is $11 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: Expected Activity Activity Cost Pool (and Activity Measure) Machine setups (number of setups ) Special processing (machine-hours) General factory (Direct labor-hours) Estimated Overhead Cost $ 30,375 $ 202,500 $ 391,300 Hubs 135 4,500 17,500 Sprockets 108 0 12,600 Total 243 4,500 30,100 Required: 1. Compute the activity rate for each activity cost pool. 2. Compute the unit product cost for Hubs and Sprockets using activity-based absorption costing.

Answer 1

Solution 1 and 2:

OAK У Activity cost pool Machine setups Special Processing General factory Computation of Activity rates Overhead costs Estimated activity $30,375 243 Setups $ 202,500 4500 Machine hours $391,300 30100 Direct Labor hours Activity Rate $125.00 $45.00 $13.00 Total $624,175 13 14 15 16 17 18 19 Activity cost pool Machine setups Special Processing General factory Computation of Overhead Assigned and Overhead per unit Hubs Sprockets Activity Rate Estimated Activity Overhead Allocated Estimated Activity overhead Allocated $125.00 135 $ 16,8751 108 $13,500 $45.00 4500 $202,500 $0 $13.00 17500 $227,500 12600 $163,800 20 Total Overhead assigned No. of units Overhead per unit $446,875 25000 17.88 $177,300 42000 4.22 21 22 23 24 ets 25 Unit Product costs Hubs Direct Materials $26.00 Direct Labor ($23*Labor hours per unit) $7.70 Overhead Cost per unit $17.88 Unit product cost $51.58 26 27 28 29 30 Sprockets $19.00 $3.30 $4.22 $26.52 et364 Sheet349 Sheet363 Sheet365 Sheet26 (7) Sheet368 Sheet369 Sheet370