Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding t

Question

Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor- Hours per Unit Production 0.70 27,000 units 0.30 41,000 units Annual Hubs Sprockets 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 $18 per hour c. Hubs require special equipment and are more complex to manufacture than Sprockets. d. The ABC system has the following activity cost pools Activit Estimated Overhead Cost $ 28,12.5 Activity Cost Pool (Activity Measure) Machine setups (number of setups) Special processing (machine-hours) General factory (organization-sustaining) Hubs Sprockets Total 225 0 4,900 NA 100 125 $196,000 4,900 NA $178,800 NA

Explanation / Answer

1 Machine setups 125 =28125/225 Special processing 40 =196000/4900 2 Hubs Sprockets Machine setups 15625 12500 Special processing 196000 0 Total overhead 211625 12500 Units 27000 41000 Overhead per unit 7.84 0.30 Hubs Sprockets Direct materials 36 18 Direct labor 12.6 5.4 Overhead 7.84 0.30 Unit cost 56.44 23.70

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