ABC, product line costing. (J. Watson) PTech Ltd. manufactures two models of cordless phones. The Family Friend model has features designed for a multiple-user family, including the ability to have multiple ring tones and colour ID from different callers. The Office Assistant model is designed for use in home offices. Data regarding the two product lines are as follows:

REQUIRED 1. Calculate the manufacturing overhead allocation rate for each activity using ABC.
2. Compute the unit cost of each model of phone using ABC.
3. Assume the company currently allocates overhead on the basis of direct labour costs.
Compute the unit cost of each model of phone using this method.
4. Compare the unit costs of each model calculated in requirements 2 and 3. Comment on your results.LO1

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Expected production Direct material cost Family Friend 50,000 units $12.14 per unit Direct labour cost $10.86 per unit Office Assistant 150,000 units $28.64 per unit $10.86 per unit PTech is considering implementing an activity-based costing (ABC) system in its plant and has identified four primary activities. Data on these activities are as follows: Equipment setup Machine processing Quality control Packaging/shipping Family Friend 50 setups 30,000 machine-hours 5,000 inspection-hours 125 shipments Office Assistant 30 setups 220,000 machine-hours 10,000 inspection-hours 75 shipments Budgeted Cost $ 44,000 $875,000 $630,000 $ 80,000