Davis Company makes two distinct products with the following information available for each.

The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows.

Required
1. Compute the manufacturing cost per unit using the plantwide overhead rate based on machine hours. What is the gross profit per unit?
2. How much gross profit is generated by each customer of the standard product using the plantwide overhead rate? How much gross profit is generated by each customer of the deluxe product using the plantwide overhead rate? What is the cost of providing customer service to each customer? What information is provided by this comparison?
3. Determine the manufacturing cost per unit of each product line using ABC. What is the gross profit per unit?
4. How much gross profit is generated by each customer of the standard product using ABC? How much gross profit is generated by each customer of the deluxe product using ABC? Is the gross profit per customer adequate?
5. Which method of product costing gives better information to managers of this company?Explain.

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Standard Deluxe Direct materials$4 per unit Direct labor hours.4 DLH per unit 5 DLH per unit Machine hours. Batches $8 per unit 3 MH per unit 75 batches 3MH per unit 75 batches 10,000 units 25 modifications Engineering modifications Number of customers ...1,000 customers 1,000 customers Market price . 50 modifications $92 per unit $125 per unit Costs Driver Indirect manufacturing Engineering support . Electricity 56,250 Engineering modifications ...A..2,500 Machine hours ectricity Setup costs . ..250 Batches Nonmanufacturing Customer service 250,000 Number of customers