LockTite Company produces two products, Pretty Safe (PS) and Virtually Impenetrable (VI). The following two tables give pertinent information about these products.

a. What is the cost per unit of Pretty Safe if LockTite uses traditional overhead allocation based on number of units produced?

b. What is the cost per unit of Pretty Safe if LockTite uses activity-based costing to allocate overhead?

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Category Number produced Direct material cost Direct labor hours Direct labor cost Total overhead PS VI 3,000 $350,000 2,000 $150,000 10,000 hours 5,000 hours $100,000 $200,000 $750,000 ABC Activity Driver Cost PS VI Production Machine hours $500,000 1,000 hours 4,000 hours Engineering Engineering hours $250,000 2,000 hours 3,000 hours