Fogerty Company makes two products, titanium Hubs and Sprockets. Data regarding

Question

Fogerty Company makes two products, titanium Hubs and Sprockets. Data regarding the two products follow:

  

Additional information about the company follows:

a. Hubs require $24 in direct materials per unit, and Sprockets require $12.

b. The direct labor wage rate is $14 per hour.

c. Hubs are more complex to manufacture than Sprockets and they require special equipment.

d. The ABC system has the following activity cost pools:

  

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. (Round intermediate calculations and final answers to 2 decimal places.)

Direct
Labor-Hours per Unit Annual
Production Hubs 0.70 12,000 units Sprockets 0.30 59,000 units

Explanation / Answer

1. Activity rate for each activity cost pool is

2. unit product cost of each product according to the ABC system

Working:

Activity Cost Pool Activity Rate Machine setups 17,280/144 120      per setup Special processing 135,000/4,500 30      per MH

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