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	18,000	units
Sprockets	0.30	43,000	units

Additional information about the company follows:

1. Hubs require $35 in direct materials per unit, and Sprockets require $18.

2. The direct labor wage rate is $10 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)	$	15,390	90	72	162
Special processing (machine-hours)	$	147,000	4,200	0	4,200
General factory (organization-sustaining)	$	77,100	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