Springs Company produces two type of calculators: scientific and business. Both products pass through two producing departments. The business calculator is by far the most popular. The following data have been gathered for these two products:

Required:
1. Compute the overhead cost per unit for each product using a plantwide, unitbased rate.

2. Compute the overhead cost per unit for each product using departmental rates.
In calculating departmental rates, use machine hours for department 1 and direct labor hours for department 2. Repeat using direct labor hours for department 1 and machine hours for department 2.
3. Compute the overhead cost per unit for each product using activity-based costing.
4. Comment on the ability of departmental rates to improve the accuracy of product costing.

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Product-Related Data Units produced per year Prime costs Direct labor hours Machine hours Production runs Inspection hours Maintenance hours Scientific Business 30,000 300,000 $100,000 $1,000,000 40,000 400,000 20,000 200,000 40 60 800 1,200 900 3,600 Department Data Department 1 Department 2 Direct labor hours: Scientific calculator 30,000 10,000 Business calculator 45,000 355,000 Total 75,000 365,000 Machine hours: Scientific calculator 10,000 10,000 Business calculator 160,000 40,000 Total 170,000 50,000 Overhead costs: Setup costs $ 90,000 $ 90,000 Inspection costs 70,000 70,000 Power 100,000 60,000 Maintenance 80,000 100,000 Total $340,000 $320,000