Question

Fogerty Company makes two products—titanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor-Hours per Unit Annual Production Hubs 0.60 24,000 units Sprockets 0.20 52,000 units Additional information about the company follows: Hubs require $25 in direct materials per unit, and Sprockets require $16. The direct labor wage rate is $20 per hour. Hubs require special equipment and are more complex to manufacture than Sprockets. 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) $ 198,000 4,400 0 4,400 General factory (organization-sustaining) $ 201,600 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