Week 4 question 3

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

	Direct labor hours	Annual production
Hubs	0.60	22,000 units
Sprockets	0.20	42,000 units

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

2. The direct labor wage rate is $10 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:

		Activity	Activity	Activity
Activity cost pool (activity measure)	Estimated overhead cost	Hubs	Sprockets	Total
Machine setups (# of setups)	$19,000	110	88	198
Special processing (machine hours)	$203,500	3,700	0	3,700
General factory (organization-sustaining)	$172,800	NA	NA	NA

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

	Hubs	Sprockets
Direct materials	$20.00	$15,00
Direct labor	6.00	2.00
Overhead	?	?
Unit cost	$35.72	$17.20