Question

Fogerty Company makes two products, titanium Hubs and Sprockets. Data regarding the two products follow:

  

	Direct Labor-Hours per Unit	Annual Production
Hubs	0.60	18,000	units
Sprockets	0.20	51,000	units

Additional information about the company follows:

a. Hubs require $34 in direct materials per unit, and Sprockets require $18.

b. The direct labor wage rate is $17 per hour.

c. Hubs are more complex to manufacture than Sprockets and they require special equipment.

d. The ABC system has the following activity cost pools:

  

	Estimated		Activity
Activity Cost Pool (Activity Measure)	Overhead Cost		Hubs	Sprockets	Total
Machine setups (number of setups)	$	15,300	85	68	153
Special processing (machine-hours)	$	184,500	4,100	0	4,100
General factory (organization-sustaining)	$	174,000	NA	NA	NA

Required

2. Determine the unit product cost of each product according to the ABC system. (Round intermediate calculations and final answers to 2 decimal places.)

For hubs and sprockets

Direct materials:

Direct Labor:

Overhead:

Answer 1

Requirement 2, along with workings

	Hubs		Sprockets
	Answer	Working	Answer	Working
Direct materials	$                34.00	[given]	$            18.00	[given]
Direct labor	$                10.20	0.60 DLHs x $ 17	$              3.40	0.20 DLHs x $ 17
Overhead	$                10.72	[ (85 x 100) + (4100 x 45)]/18000 units	$              0.13	[ (68 x 100) + (0 x 45)]/51000 units
Unit cost	$                54.92		$            21.53

--ABC workings

Activity Cost Pool	Overhead cost	Total Activity	Activity Rate
	[A]	[B]	[C = A/B]
Machine setups	$15,300	153	$100.000	per setup
Special processing	$184,500	4100	$45.00	per MH