Question

Fogerty Company makes two products—titanium Hubs and Sprockets. Data regarding the two products follow:

	Direct Labor-Hours per Unit	Annual Production
Hubs	0.70	10,000	units
Sprockets	0.30	54,000	units

Additional information about the company follows:

1. Hubs require $30 in direct materials per unit, and Sprockets require $19.

2. The direct labor wage rate is $11 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)	$	24,300	100	80	180
Special processing (machine-hours)	$	114,000	3,800	0	3,800
General factory (organization-sustaining)	$	282,400	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.

Answer 1