Computing ABC Product Costs (L02, L03)

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

Hubs Sprockets Direct Labor-Hours per Unit 0.80 0.40 Annual Production 10,000 units 40,000 units 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 $ 1 5 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 Machine setups Number of setups Special processing Machine-hours General factory Direct labor-hours Estimated Overhead Cost $72,000 $200,000 $816,000 Hubs 100 5,000 8,000 Activity Sprockets 300 16,000 Total 400 5,000 24,000 Required:
1 . Compute the activity rate (i.e., predetermined overhead rate) for each activity cost pool.
2. Determine the unit product cost of each product according to the ABC system.