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 $32 in direct materials per unit, and Sprockets require $18.
b. The direct labor wage rate is $15 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:
|
Activity Cost Pool (Activity Measure)
|
Estimated Overhead Cost
|
Activity
|
|
Hubs
|
Sprockets
|
Total
|
|
Machine setups (number of setups)
|
$72,000
|
100
|
300
|
400
|
|
Special processing (machine-hours)
|
$200,000
|
5,000
|
0
|
5,000
|
|
General factory (organization-sustaining)
|
$816,000
|
NA
|
NA
|
NA
|
a. Compute the activity rate for each activity cost pool. Did you compute an activity rate for all of the activity cost pools? Why?
b. Determine the unit product cost of each product according to the ABC system.