Harcourt 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:

Other production information includes the following:

Requirements
1. Harcourt's original single plant-wide overhead allocation rate system allocated indirect costs to products at $140.00 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.
2. Compute the predetermined overhead allocation rate for each activity.
3. 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. (First compute the total activity-based costs allocated to each product line, and then compute the cost per unit.)
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 as they did?

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Estimated Quantity of Allocation Base Estimated Activity Indirect Cost $ 96,000 Allocation Base Materials handling Number of kilos Number of machine hours 24,000 kilos 3,000 hours 1,900 samples Packaging 210,000 114,000 Number of samples Quality assurance assurance Total indirect costs $ 420,000 Travel Packs 51,000 packs 5,100 Commercial Containers Units produced Weight in kilos Machine hours Number of samples 2,800 containers 9,800 1,960 510 560 765