Question

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

	Direct Labor-Hours per Unit	Annual Production
Hubs	0.50	11,000	units
Sprockets	0.10	56,000	units

Additional information about the company follows:

1. Hubs require $36 in direct materials per unit, and Sprockets require $13.

2. The direct labor wage rate is $18 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)	$	28,710	145	116	261
Special processing (machine-hours)	$	147,000	4,200	0	4,200
General factory (organization-sustaining)	$	44,700	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.

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2

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

2 decimal places

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

Answer 1

1)
Activity cost pool	estimated overhead (A)	activity (B)	rate (A)/(B)
machine setup	28710	261	110	Per setup
special processing	147000	4200	35	pe MH

2)	HUBS
Activity cost pool	rate (A)	activity (B)	Total (A)*(B)
machine setup	110	145	15950
special processing	35	4200	147000
Total overhead			162950

Overhead cost p.u = 162950/11000 = 14.81

	Sprockets
Activity cost pool	rate (A)	activity (B)	Total (A)*(B)
machine setup	110	116	12760
special processing	35	0	0
Total overhead			12760

Overhead cost p.u = 12760/56000 = 0.23

calculation of unit product cost
	Hubs	sprockets
Direct material	36	13
direct labor (18*0.50),(18*0.10)	9	1.8
overhead	14.81	0.23
unit cost	59.81	15.03