Question

Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor- Hours per Annua Unit Productiorn Hubs Sprockets 0.50 24,000 units 0.10 49,000 units Additional information about the company follows: a. Hubs require $28 in direct materials per unit, and Sprockets require $10. b. The direct labor wage rate is $16 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:

Answer 1

Answer

• All working forms part of the answer
• Requirement 1

Activity Cost Pool	Overhead cost	Total cost drivers	Activity Rate = ANSWER
Machine Setup	$          29,160.00	243	$                120.00	per setup
Special Processing	$        216,000.00	4,800	$                   45.00	per MH

• Requirement 2

Working #1

Activity Cost Pool	Hubs	Sprockets
Machine Setup	$          16,200.00 [135 x $120]	$        12,960.00 [108 x $120]
Special Processing	$        216,000.00 [ 4800 x $45]	$                        -
Total Overhead cost allocated	$        232,200.00	$        12,960.00
Total units	24000	49000
Overhead cost per unit	$                     9.68	$                   0.26

Working #2

Working		Hubs	Sprockets
A	Direct labor hours per unit	0.50	0.10
B	Wage rate per hout	$                   16.00	$                 16.00
C= A x B	Direct labor cost per unit	$                     8.00	$                   1.60

---Answer

Working		Hubs	Sprockets
A	Direct Materials	$                   28.00	$                 10.00
B [Working #2]	Direct Labor	$                     8.00	$                   1.60
C [Working #1]	Overhead	$                     9.68	$                   0.26
D = A+B+C	Unit Cost	$                   45.68	$                 11.86