Fisico Company produces exercise bikes. One of its plants produces two versions: a standard model and a deluxe model. The deluxe model has a wider and sturdier base and a variety of electronic gadgets to help the exerciser monitor heartbeat, calories burned, distance traveled, etc. At the beginning of the year, the following data were prepared for this plant:

Required:
1. Calculate the cost per unit for each product using direct labor hours to assign all overhead costs.
2. Calculate activity rates and determine the overhead cost per unit. Compare these costs with those calculated using the unit-based method. Which cost is the most accurate? Explain.LO1 

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Expected quantity Selling price Prime costs Machine hours $370 Standard Model Deluxe Model 30,000 15,000 $700 $4.5 million $5.25 million 37,500 37,500 Direct labor hours 75,000 75,000 Engineering support (hours) 13,500 31,500 Receiving (orders processed) 3,000 4,500 Materials handling (number of moves) 15,000 45,000