Question

Fogerty Company makes two products, titanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor- Hours per Unit 0.60 0.20 Annual Production 16,000 units 43,000 units Hubs Sprockets Additional Information about the company follows: a. Hubs require $24 in direct materials per unit, and Sprockets require $19. b. The direct labor wage rate is $16 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 Overhead Cost Hubs $ 19,665 115 $ 92,000 4,600 $ 130,000 NA Activity Sprockets 92 Activity Cost Pool (Activity Measure) Machine setups (number of setups) Special processing machine-hours) General factory (organization-sustaining) Total 207 4,600 NA NA Required: 1. Compute the activity rate for each activity cost pool. Activity Rate Activity Cost Pool Machine setups per setup per MH Special processing 2. Determine the unit product cost of each product according to the ABC system. (Round Intermediate calculations and final answers to 2 decimal places.) Hubs Sprockets Direct materials Direct labor Overhead Unit cost $ 0.00 $ 0.00

Answer 1

Activity Cost Pool Machin Setup =(19665/207) Special Processing (92000/4600) $ Activity Rate 95 Per Setup 20 Per MH Hubs Total Ovehead Cost Assigned Machine Setup (Rate * setups) Special Processing (Rate* Machine Hours) Total Oveheads Ovehead cost per unit (Ov/ Units) Sprockets 10925 8740 92000 102925 8740 6.43 0.20 Determine the Unit Product Cost Hubs Direct Material The Direct labor(16*0.6),(16*0.2) Overhead cost Unit Cost Sprockets 24.00 19.00 9.60 3.20 6.43 0.20 40.03 22.40