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EXERCISE 7-13 Computing ABC Product Costs [LO7-3, L07-4] Fogerty Company makes two products, titanium Hubs and Sprockets. Data regarding the two prod- ucts follow: Direct Labor-Hours per Unit Annual Production Hubs ....... Sprockets ........ 0.80 0.40 10,000 units 40,000 units Additional information about the company follows: a. Hubs require $32 in direct materials per unit, and Sprockets require $18. b. The direct labor wage rate is $15 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 Activity Cost Pool (Activity Measure) Total Estimated Overhead Cost $72,000 $200,000 $816,000 Machine setups (number of setups) ........ Special processing (machine-hours) ........ General factory (organization-sustaining) .... Hubs 100 5,000 NA Sprockets 300 0 NA 400 5,000 NA Required: 1. Compute the activity rate for each activity cost pool. Did you compute an activity rate for all of the activity cost pools? Why? 2. Determine the unit product cost of each product according to the ABC system.
EXERCISE 7-13 Computing ABC Product Costs [LO7-3, L07-4] Fogerty Company makes two products, titanium Hubs and Sprockets. Data regarding the two prod- ucts follow: Direct Labor-Hours per Unit Annual Production Hubs ....... Sprockets ........ 0.80 0.40 10,000 units 40,000 units Additional information about the company follows: a. Hubs require $32 in direct materials per unit, and Sprockets require $18. b. The direct labor wage rate is $15 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 Activity Cost Pool (Activity Measure) Total Estimated Overhead Cost $72,000 $200,000 $816,000 Machine setups (number of setups) ........ Special processing (machine-hours) ........ General factory (organization-sustaining) .... Hubs 100 5,000 NA Sprockets 300 0 NA 400 5,000 NA Required: 1. Compute the activity rate for each activity cost pool. Did you compute an activity rate for all of the activity cost pools? Why? 2. Determine the unit product cost of each product according to the ABC system.
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Beverley SmithLv2
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Related questions
Performance Products Corporation makes two products, titaniumRims and Posts. Data regarding the two products follow:
| Direct Labor-Hours per unit | Annual Production | |
| Rims | 0.40 | 22,000 units |
| Posts | 0.20 | 84,000 units |
| Additionalinformation about the company follows: |
| a. Rims require$17 in direct materials per unit, and Posts require $10. |
| b. The directlabor wage rate is $17 per hour. |
| c. Rims are morecomplex to manufacture than Posts and they require specialequipment. |
| d. The ABCsystem has the following activity cost pools: |
| Estimated | Activity | |||||
| Activity Cost Pool | Activity Measure | Estimated Overhead Cost | Rims | Posts | Total | |
| Machine setups | Number of setups | $ | 22,000 | 99 | 85 | 184 |
| Special processing | Machine-hours | $ | 190,000 | 4,500 | 0 | 4,500 |
| General factory | Direct labor-hours | $ | 269,000 | 8,800 | 16,800 | 25,600 |
1.
Compute the activity rate for eachactivity cost pool. (Round your final answers to 2 decimalplaces.)
| Activity CostPool | Activity Rate | |
| Machine setups | $ | per setup |
| Special processing | $ | per MH |
| General factory | $ | per DLH |
2.
Determine the unit product cost ofeach product according to the ABC system. (Do not roundintermediate calculation. Round your final answers to 2 decimalplaces.)
| Unitproduct cost of Rims | $ |
| Unitproduct cost of Posts | $ |
[The following information applies to the questionsdisplayed below.]
| Performance Products Corporationmakes two products, titanium Rims and Posts. Data regarding the twoproducts follow: |
| Direct Labor-Hours per unit | Annual Production | |
| Rims | 0.40 | 18,000 units |
| Posts | 0.70 | 77,000 units |
| Additional information about thecompany follows: |
| a. Rims require $14 in directmaterials per unit, and Posts require $11. |
| b. The direct labor wage rate is$15 per hour. |
| c. Rims are more complex tomanufacture than Posts and they require special equipment. |
| d. The ABC system has thefollowing activity cost pools: |
| Estimated Activity | ||||||
| Activity Cost Pool | Activity Measure | Estimated Overhead Cost | Rims | Posts | Total | |
| Machine setups | Number ofsetups | $ | 30,030 | 120 | 80 | 200 |
| Specialprocessing | Machine-hours | $ | 147,840 | 2,000 | 0 | 2,000 |
| General factory | Directlabor-hours | $ | 576,000 | 7,000 | 29,000 | 36,000 |
| Required: | |
| 1. | Compute the activity rate foreach activity cost pool. (Round your final answers to 2decimal places.) |
| 2. | Determine the unit product costof each product according to the ABC system. (Do not roundintermediate calculation. Round your final answers to 2 decimalplaces.) |
