Problem - Fogerty Company makes two products, titanium Hubs and Sprockets. Data regarding the two products follow:
|
|
Direct Labor-Hours per Unit
|
Annual Production
|
|
Hubs
|
0.90
|
14,000 units
|
|
Sprockets
|
0.50
|
56,000 units
|
Additional information about the company follows:
a. Hubs require $39 in direct materials per unit, and Sprockets require $15.
b. The direct labor wage rate is $13 per hour.
c. Hubs are more complex to manufacture than Sprockets and they require special equipment.
d. The ABC system has the following activity cost pools:
|
Activity Cost Pool (Activity Measure)
|
Estimated Overhead Cost
|
Activity
|
|
Hubs
|
Sprockets
|
Total
|
|
Machine setups (number of setups)
|
$19,440
|
90
|
72
|
162
|
|
Special processing (machine-hours)
|
$180,000
|
4,000
|
0
|
4,000
|
|
General factory (organization-sustaining)
|
$264,600
|
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.