Exercise 7-13 (Algo) Computing ABC Product Costs [LO7-3, LO7-4]

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

	Direct Labor-Hours per Unit	Annual Production
Hubs	0.60	15,000	units
Sprockets	0.20	52,000	units

Additional information about the company follows:

1. Hubs require $20 in direct materials per unit, and Sprockets require $15.

2. The direct labor wage rate is $20 per hour.

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

4. 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)	$	25,200	140	112	252
Special processing (machine-hours)	$	245,000	4,900	0	4,900
General factory (organization-sustaining)	$	196,200	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.