Question

Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow Direct Labor- Annual Hours per Unit Production Hubs 18,000units 54,000units 0.70 Sprockets 0.30 Additional information about the company follows: O. Hubs require $30 in direct materials per unit, and Sprockets require $15 a. The direct labor wage rate is $20 per hour. b. Hubs require special equipment and are more complex to manufacture than Sprockets. c. The ABC system has the following activity cost pools: Estimated Overhead Activity Activity Cost Pool (Activity Measure) Machine setups (number of setups) Special processing (machine-hours) General factory (organization-sustaining) Cost $ 23,085 $ 92,500 3,700 $ 288,000 Hubs Sprockets Total 95 76 171 0 3,700 NA 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.

Answer 1

1) Activity rate

a) Machine setup = 23085/171 = 135 per setup

Special processing = 92500/3700 = 25 per machine hour

2) Unit product cost

	Hubs	Sprocket
Machine setup	12825	10260
Special processing	92500	0
Total overhead	105325	10260
Overhead cost per unit	5.85	0.19
Direct material	30	15
Direct labor	20	6
Unit product cost	55.85	21.19