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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 | 0.70 | 18,000 | units |
| Sprockets | 0.30 | 43,000 | units |
| |
Additional information about the company follows:
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Hubs require $35 in direct materials per unit, and Sprockets require $18.
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The direct labor wage rate is $10 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) | $ | 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.
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