Believing that its traditional cost system may be providing misleading information, Dover Corporation is considering an activity-based costing (ABC) approach. Dover Corporation employs a full-cost system and has been applying its manufacturing overhead on the basis of machine hours. The organization plans on using 50,000 direct labor hours and 30,000 machine hours in 2010. The following data show the manufacturing overhead that is budgeted:

Cost, sales and production data for one of the company’s products for the coming year are as follows:
Direct material cost per unit .............$4.40
Direct labor cost per unit (.05 DLH @ $15 per DLH) ..... 0.75
$5.15
Sales and production data:
Expected sales .................... 20,000 units
Batch size ..................... 5,000 units
Setups ....................... 2 per batch
Total parts per finished unit .............. . 5 parts
Machine hours required .................. 80 MH per batch
a. Compute the per-unit cost for this product for 2010 if Dover Corporation uses the traditional full-cost system.
b. Compute the per-unit cost for this product for 2010 if the Dover Corporation employs an activity-based costing system.
c. Assume the company wishes to achieve a gross profit rate of 40 percent. Determine the selling price that would be required based on your answers to (a) and(b).

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Budgeted Cost Budgeted Activity Number of parts handled Number of setups Machine hours Number of batches Total manufacturing overhead cost Driver Activity Cost Material handling Setup costs Machining costs Quality control 6,000,000 750 30,000 500 720,000 315,000 540,000 225,000 $1800,000