Fogerty Company makes two productstitanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor-Hours per
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Question:
Fogerty Company makes two products—titanium Hubs and Sprockets. Data regarding the two products follow:
Direct Labor-Hours per Unit | Annual Production | ||
Hubs | 0.80 | 18,000 | units |
Sprockets | 0.40 | 49,000 | units |
Additional information about the company follows:
Hubs require $37 in direct materials per unit, and Sprockets require $20.
The direct labor wage rate is $13 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) | $ | 16,065 | 85 | 68 | 153 |
Special processing (machine-hours) | $ | 133,000 | 3,800 | 0 | 3,800 |
General factory (organization-sustaining) | $ | 386,800 | 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.
Related Book For
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
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