1. Solomon Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs to product lines using activity-based costing. The costs and cost drivers associated with the four overhead activity cost pools follow:

Activities
	Unit Level		Batch Level		Product Level		Facility Level
Cost	$	34,500	$	26,880	$	11,000	$	220,000
Cost driver	1,500 labor hrs.		48 setups		Percentage of use		20,000 units

Production of 740 sets of cutting shears, one of the companys 20 products, took 240 labor hours and 7 setups and consumed 18 percent of the product-sustaining activities.

Required

a. Had the company used labor hours as a company wide allocation base, how much overhead would it have allocated to the cutting shears?

How much overhead is allocated to the cutting shears using activity-based costing?

a.	Allocated cost
b.	Allocated cost

b. Compute the overhead cost per unit for cutting shears first using activity-based costing and then using direct labor hours for allocation if 740 units are produced. If direct product costs are $130 and the product is priced at 35 percent above cost for what price would the product sell under each allocation system?

	ABC	Labor Hrs
Allocated overhead
Direct cost
Total cost per unit
Desired profit
Sales price