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	15,000	units
Sprockets	0.40	45,000	units

Additional information about the company follows:

1. Hubs require $35 in direct materials per unit, and Sprockets require $12.

2. The direct labor wage rate is $19 per hour.

3. Hubs require special equipment and are more complex to manufacture than Sprockets.

4. 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)	$	23,400	100	80	180
Special processing (machine-hours)	$	180,000	4,500	0	4,500
General factory (organization-sustaining)	$	138,000	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.

	Activity Cost Pool Activity Rate Machine setups. ----. per setup Special processing ---- per MH

2,

	Hubs Sprockets Direct materials Direct labor Overhead Unit cost $0.00 $0.00

Answer 1