Fogerty Company makes two products—titanium Hubs and Sprockets.Data regarding the two products follow:
| Direct
Labor-Hours per Unit | Annual
Production |
| Hubs | 0.80 | 22,000 | units |
| Sprockets | 0.40 | 57,000 | units |
|
Additional information about the company follows:
Hubs require $35 in direct materials per unit, and Sprocketsrequire $12.
The direct labor wage rate is $15 per hour.
Hubs require special equipment and are more complex tomanufacture 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) | $ | 21,600 | 120 | 96 | 216 |
| Special processing (machine-hours) | $ | 253,000 | 4,600 | 0 | 4,600 |
| General factory (organization-sustaining) | $ | 222,800 | NA | NA | NA |
|
Required:
1. Compute the activity rate for each activity cost pool.
2. Determine the unit product cost of each product according tothe ABC system.
he activity rate for each activity cost pool.
|
| | Activity Cost Pool | Activity Rate | | Machine setups | | per setup | | Special processing | | per MH |
|
| Hubs | Sprockets | | Direct materials | | | | Direct labor | | | | Overhead | | | | Unit cost | | |
|
