Sporti Gus’ management wants you to compute the total cost and unit cost of the 20 tennis rackets and 10 fishing rods for the month of June, which had the following level of activities:

Tennis Rackets

$2,000 in sales 2 purchase orders 2 promotions Fishing Rods

$1,000 in sales 3 purchase orders 2 promotions 1.1. Sell goods on commission 2.1 Process purchases 3.1 Provide product-level advertising 3.2 Provide product-inventory record- 1 product 1 product keeping 4.1 Accept customer returns 6 returns 2 returns 5.1 Supervise sales personnel See your computations See your computations for for activity 1.1 activity 1.1 5.2 Use building 80 sq. ft. 60 sq. ft.

Required

a. Compute the cost-driver rates for each cost-driver base.

b. Using ABC, compute the cost of each product given the activity level for the month of June.
Compute both the total cost and unit cost for each product for the month of June. (Sporti Gus sold 20 tennis rackets and 10 fishing rods in June.)

c. Assume that the company’s traditional costing system had assigned the batch-level, product-level, customer-level, and facility-level costs at a rate of $8.70 per unit sold. Using this traditional costing approach, compute the cost of each product given the activity level for the month of June. Be sure to add the unit-level costs to the $8.70 per unit sold. Compute both the total cost and unit cost for each product for the month of June.

d. After comparing ABC and traditional costing systems, determine whether the unit costs of the two products differ significantly. If they do, what causes the differences?