Question

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

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 16,000 units
Sprockets 0.20 47,000 units

Additional information about the company follows:

Hubs require $37 in direct materials per unit, and Sprockets require $12.

The direct labor wage rate is $20 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) $ 31,590 135 108 243
Special processing (machine-hours) $ 198,000 4,400 0 4,400
General factory (organization-sustaining) $ 56,600 NA NA NA

Required:

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

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

Homework Answers

Answer #1
1
ABC Total cost Total cost driver Cost per driver
Machine setups 31590 243 130
Special processing 198000 4400 45
Hubs Sprockets
Machine setups 17550 14040 31590
Special processing 198000 0 198000
Total overheads cost 215550 14040 229590
Number of units 16000 47000
Overhead cost per unit 13.47 0.30
2 Hubs Sprockets
Direct material 37 12
Direct labor 12 4
Overhead 13.47 0.3
Unit cost 62.47 16.3
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