Crescent Pharmaceuticals manufactures an over-the-counter allergy medication. The company sells both large commercial containers of 1,000 capsules to health care facilities and travel packs of 20 capsules to shops in airports, train stations, and hotels. The following information has been developed to determine if an activity-based costing system would be beneficial:

Actual production information includes the following:

Requirements
1. Compute the predetermined overhead allocation rate for each activity.
2. Use the predetermined overhead allocation rates to compute the activity-based costs per unit of the commercial containers and the travel packs. Round to two decimal places. 3. Crescents original single plantwide overhead allocation rate costing system allocated indirect costs to products at $153.00 per machine hour. Compute the total indirect costs allocated to the commercial containers and to the travel packs under the original system. Then compute the indirect cost per unit for each product. Round to two decimal places.
4. Compare the indirect activity-based costs per unit to the indirect costs per unit from the traditional system. How have the unit costs changed? Explain why the costs changed.

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Estimated Indirect CostAllocation Base Estimated Quantity of Allocation Base Activity $ 96,000 Number of kilos Materials handling Packaging Quality assurance Total indirect costs 24,000 kilos 4,140 hours 2,075 samples 207,000 124,500 427,500 Number of machine hours Number of samples Commercial Containers Travel Packs 54,000 packs Units produced Weight in kilos Machine hours Number of samples 4,000 containers 14,000 3,000 5,400 540 810 400