Exercise 7-13 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	25,000	units
Sprockets	0.20	58,000	units

Additional information about the company follows:

Hubs require $32 in direct materials per unit, and Sprockets require $11.

The direct labor wage rate is $11 per hour.

Hubs require special equipment and are more complex to manufacture 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)	$	21,735	105	84	189
Special processing (machine-hours)	$	202,500	4,500	0	4,500
General factory (organization-sustaining)	$	189,000	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.

Exercise 7-13 Computing ABC Product Costs [LO7-3, LO7-4] Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor- Hours per Unit Production 0.60 25,000 units 0.20 58,000 units Annual Hubs Sprockets Additional information about the company follows a. Hubs require $32 in direct materials per unit, and Sprockets require $11 b. The direct labor wage rate is $11 per hour. C. Hubs require special equipment and are more complex to manufacture than Sprockets d. The ABC system has the following activity cost pools Estimated Overhead Activit Activity Cost Pool (Activity Measure) Machine setups (number of setups) Special processing (machine-hours) General factory (organization-sustaining) Cost 105 $202,500 4,500 NA Hubs Sprockets Total 189 0 4,500 NA 21,735 84 $189,000 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