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Fogerty Company makes two products, titanium Hubs and Sprockets. Data regarding the two products follow:    Direct Labor-Hours per...

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Accounting

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

  

Direct
Labor-Hours per Unit		Annual
Production
Hubs0.8012,000units
Sprockets0.4043,000units

Additional information about the company follows:

a. Hubs require $21 in direct materials per unit, and Sprocketsrequire $11.

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

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

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

  

EstimatedActivity
Activity CostPool (Activity Measure)Overhead CostHubsSprocketsTotal
Machine setups(number of setups)$17,9559576171
Specialprocessing (machine-hours)$161,0004,60004,600
General factory(organization-sustaining)$302,000NANANA
Activity Cost PoolActivity Rate
Machinesetupsper setup
Special processingperMH
HubsSprockets
Directmaterials
Direct labor
Overhead
Unitcost

Answer & Explanation Solved by verified expert
3.7 Ratings (686 Votes)

Activity Cost Pool Activity Rate
Calculation Rate
Machine setups =17955/171 = $              105.00 per setup
Special processing =161000/4600 = $                35.00 per MH
HUBS SPROCKETS
Direct materials $                  21.00 $                11.00
Direct labor [17*0.8/17*0.4] $                  13.60 $                   6.80
Overhead:
= 95*105/12000 = $                     0.83
= (76*105+4600*35)/43000 = $                   3.93
Unit cost $                  35.43 $                21.73

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