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Exercise 7-13 Computing ABC Product Costs [LO7-3, LO7-4] Fogerty Company makes...

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Accounting

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 Annual Production
Hubs 0.70 24,000 units
Sprockets 0.30 42,000 units

Additional information about the company follows:
a.

Hubs require $25 in direct materials per unit, and Sprockets require $19.
b. The direct labor wage rate is $12 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:

Estimated Activity
Activity Cost Pool (Activity Measure) Overhead Cost Hubs Sprockets Total
Machine setups (number of setups) $ 26,730 135 108 243
Special processing (machine-hours) $ 220,000 4,400 0 4,400
General factory (organization-sustaining) $ 256,200 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. (Round intermediate calculations and final answers to 2 decimal places.)

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