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:

Additional information about the company follows:

a. Hubs require $30 in direct materials per unit, and Sprockets require $17.

b. The direct labor wage rate is $13 per hour.

c. Hubs are more complex to manufacture than Sprockets and they require special processing.

d. The company’s activity-based absorption costing system has the following activity cost pools:

  

Required:

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

2. Compute the unit product cost for Hubs and Sprockets using activity-based absorption costing.

Direct
Labor-Hours per Unit Annual Production Hubs 0.60 25,000 units Sprockets 0.20 55,000 units

Explanation / Answer

1 Activity rates Machine setups 120 =31320/261 Special processing 50 =245000/4900 General factory 20 =520000/26000 2 Hubs Sprockets Machine setups 17400 13920 Special processing 245000 0 General factory 300000 220000 Total overhead 562400 233920 Units 25000 55000 Overhead per unit 22.50 4.25 Hubs Sprockets Direct materials 30 17 Direct Labor 7.8 2.6 Overhead 22.50 4.25 Unit product cost 60.30 23.85

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