Memory Disk Inc. is considering a change to activity-based product costing. The company produces two products, CDs and DVDs, in a single production department. The production department is estimated to require 3,000 direct labor hours. The total indirect labor is budgeted to be $270,000. Time records from indirect labor employees revealed that they spent 40% of their time setting up production runs and 60% of their time supporting actual production. The following information about CDs and DVDs was determined from the corporate records:

a. Determine the indirect labor cost per unit allocated to CDs and DVDs under a single plantwide factory overhead rate system using the direct labor hours as the allocation base.
b. Determine the budgeted activity costs and activity rates for the indirect labor under activity-based costing. Assume two activities€”one for setup and the other for production support.
c. Determine the activity cost per unit for indirect labor allocated to each product under activity-based costing.
d. Why are the per-unit allocated costs in (a) different from the per-unit activity cost assigned to the products in (c)?

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Direct Labor Number of Setups Hours Units 1,500 1,500 3,000 CDs 75,000 500 1,100 1,600 DVDS 75,000 Total 150,000