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Fogerty Company makes two products—titanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor-Hours per Unit Annual Production Hubs 0.80 14,000 units Sprockets 0.40 54,000 units Additional...

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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
Hubs0.8014,000units
Sprockets0.4054,000units

Additional information about the company follows:

  1. Hubs require $37 in direct materials per unit, and Sprocketsrequire $14.

  2. The direct labor wage rate is $19 per hour.

  3. Hubs require special equipment and are more complex tomanufacture than Sprockets.

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

EstimatedActivity
Activity Cost Pool (Activity Measure)Overhead CostHubsSprocketsTotal
Machine setups (number of setups)$32,805135108243
Special processing (machine-hours)$216,0003,60003,600
General factory (organization-sustaining)$335,200NANANA

Required:

1. Compute the activity rate for each activity cost pool.

2. Determine the unit product cost of each product according tothe ABC system.

Activity Cost PoolActivity Rate
Machine setupsper setup
Special processingper MH
HubsSprockets
Direct materials
Direct labor
Overhead
Unit cost

Answer & Explanation Solved by verified expert
3.7 Ratings (437 Votes)

--All working forms part of the answer

--Requirement 1

Activity Cost Pool Overhead cost Total Activity Activity Rate
[A] [B] [C = A/B]
Machine setups $32,805 243 $135 per setup
Special processing $216,000 3600 $60 per MH

--Requirement 2

Hubs Sprockets
Answer Working Answer Working
Direct materials $             37.00 [given] $            14.00 [given]
Direct labor $             15.20 0.80 DLHs x $ 19 $              7.60 0.40 DLHs x $ 19
Overhead $             16.73 [ (135 x 135) + (3600 x 60)]/14000 units $              0.27 [ (108 x 135) + (0 x 60)]/54000 units
Unit cost $             68.93 $            21.87

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