Compute the activity rate for each activity cost pool

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Reference no: EM131566665

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.

Reference no: EM131566665

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