Week 3 2 Fogerty Company makes two products-titanium Hubs and Sprockets. Data re

Question

Week 3 2 Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow Direct Labor- 1.85 points Hours per Annual Unit Production 0.78 10,e88units Hubs Sprockets 8.38 49,e88units Additional information about the company follows: a. Hubs require $36 in direct materials per unit, and Sprockets require $18. b. The direct labor wage rate is $15 per hour C, Hubs require special equipment and are more co d. The ABC system has the following activity cost pools mplex to manufacture than Sprockets. Estimated Overhead Cost Activity Cost Pool (Activity Measure) Machine setups (number of setups) Special processing (machine-hours) General factory (organization-sustaining) Hubs 35,235 145 s 135,00e 4,50 139,3ee NA 116 261 e 4,580 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. Prev 2 of 9 Next O Type here to search

Explanation / Answer

1) Compute the activity for each cost pool : (Amount in $ ) (a) (b) (a)/(b) Activity cost pool Estimated overhead cost Expected activity Activity rate Machine set ups 35235 261 set ups 135 per set up special processing 135000 4500 Mhs 30 per machine Hour 2) Determination of unit cost of each product according to ABC system : Hubs : Activity cost pool Activity rate Activity ABC cost Machine set ups 135 per set up 145 19575 Special processing 30 per machine hour 4500 135000 154575 Sprockets : Activity cost pool Activity rate Activity ABC cost Machine set ups 135 per set up 116 15660 Special processing 30 per machine hour 0 0 15660 Hubs Sprockets Direct materials 36 18 Direct labour : $ 15 per DLH * 0.7 DLH per unit' 10.5 $15 per DLH * 0.30 DLH per unit 4.5 Overhead : 154575/10000 units 15.46 15660/40000 units 0.39 Unit cost 61.96 22.89

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