Question

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

Direct Labor-Hours per Unit Annual Production Hubs 0.70 16,000 units Sprockets 0.30 57,000 units Additional information about the company follows: Hubs require $32 in direct materials per unit, and Sprockets require $15. The direct labor wage rate is $17 per hour. Hubs require special equipment and are more complex to manufacture than Sprockets. 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) $ 20,790 110 88 198 Special processing (machine-hours) $ 144,000 4,800 0 4,800 General factory (organization-sustaining) $ 165,100 NA NA NA Compute the activity rate for each activity cost pool. 2. Determine the unit product cost of each product according to the ABC system. Determine the unit product cost of each product according to the ABC system. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Hubs Sprockets Direct materials $32.00 $15.00 Direct labor 11.90 5.10 Overhead Unit cost $43.90 $20.10

Answer 1

!)	Activity rate
				Estimated	Activity	Rate
	Activity cost pool			overhead
				A	B	C=a/b
	Machine setups			20,790	198	105	per setup
	Special processing			144,000	4,800	30	per machine hours
2)	overhead allocated = rate *Activity
	hubs
	Activity cost pool		Rate	Activity	total
			A	B	C=A*B
	Machine setups		105	110	11550
	Special processing		30	4,800	144000
	total overhead				155550
	overhead cost per unit			155550/16000
				9.72
	Sprockets
	Activity cost pool		Rate	Activity	total
			A	B	C=A*B
	Machine setups		105	88	9240
	Special processing		30	0	0
	total overhead				9240
	overhead cost per unit			9240/57000
				0.16
			hubs	Sprockets
	Direct materials		32	15
	direct labor		11.9	5.1
	overhead		9.72	0.16
	unit cost		53.62	20.26