Question

Fogerty company makes two products—titanium hubs and sprockets. data regarding the two products follow: direct labor-hours per unitannual production hubs0.9016,000units sprockets0.5052,000units additional information about the company follows: hubs require $33 in direct materials per unit, and sprockets require $11. the direct labor wage rate is $13 per hour. hubs require special equipment and are more complex to manufacture than sprockets. the abc system has the following activity cost pools: activity cost pool (activity measure)estimated overhead costactivity hubssprocketstotal machine setups (number of setups)$ 17,0109072162 special processing (machine-hours)$ 258,0004,30004,300 general factory (organization-sustaining)$ 352,400nanana 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.

Answer 1

The activity rate for each activity cost pool needs to be computed by dividing the estimated overhead cost by the activity measure. The unit product cost of each product according to the ABC system can be determined by multiplying the activity rate by the activity measure and adding the direct materials cost.

Step-by-step explanation:

1. To compute the activity rate for each activity cost pool, you need to divide the estimated overhead cost of each activity cost pool by the activity measure:

Activity Rate for Machine Setups = $17,010 / 90 setups = $189 per setup

Activity Rate for Special Processing = $258,000 / 4,300 machine-hours = $60 per machine-hour

Activity Rate for General Factory = $352,400 / 0 activity = NaN (Not applicable)

2. To determine the unit product cost of each product according to the ABC system, you need to multiply the activity rate by the activity measure for each product:

Unit Product Cost of Hubs = ($189 x 0.9) + $33 = $183.10

Unit Product Cost of Sprockets = ($60 x 0.5) + $11 = $41