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Fogerty Company makes two productstitanium Hubs and Sprockets. Data regarding the two products follow:
| | Direct Labor-Hours per Unit | Annual Production |
| Hubs | 0.90 | 26,000 | units |
| Sprockets | 0.50 | 43,000 | units |
| |
Additional information about the company follows:
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Hubs require $33 in direct materials per unit, and Sprockets require $19.
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The direct labor wage rate is $11 per hour.
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Hubs require special equipment and are more complex to manufacture than Sprockets.
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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) | $ | 13,680 | 80 | 64 | 144 |
| Special processing (machine-hours) | $ | 123,000 | 4,100 | 0 | 4,100 |
| General factory (organization-sustaining) | $ | 281,400 | 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.
Activity Cost Pool Activity Rate per setup Machine setups Special processing per MH Hubs Sprockets Direct materials Direct labor Overhead Unit cost
Answer & Explanation
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