1.) Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the companys two product lines appear below:

Deluxe			Standard
Direct materials per unit	$	62.00		$	50.00
Direct labor per unit	$	20.00		$	16.40
Direct labor-hours per unit		0.70	DLHs		1.40	DLHs
Estimated annual production		10,000	units		50,000	units

The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below:

Estimated total manufacturing overhead	$	562,000
Estimated total direct labor-hours		77,000	DLHs

Required:

1. Determine the unit product costs of the Deluxe and Standard products under the companys traditional costing system.

2. The company is considering replacing its traditional costing system with an activity-based absorption costing system that would have the following three activity cost pools:

			Expected Activity
Activity Cost Pools (and Activity Measures)	Estimated Overhead Cost		Deluxe	Standard	Total
Supporting direct labor (direct labor-hours)	$	385,000	7,000	70,000	77,000
Batch setups (setups)		114,000	200	100	300
Safety testing (tests)		63,000	30	70	100
Total manufacturing overhead cost	$	562,000

Determine the unit product costs of the Deluxe and Standard products under the activity-based absorption costing system.

2.) Platinum Web Services designs and maintains websites for small business entrepreneurs. Competition has been intensifying in recent years and the company has been losing business to larger web design firms. Summary data concerning the last two years of operations follow:

	Last Year		This Year
Estimated hours of service demanded		1,200		950
Estimated overhead cost	$	90,000	$	90,000
Actual hours of service provided		1,100		850
Actual overhead cost incurred	$	90,000	$	90,000
Hours of service available at capacity		2,000		2,000

The company applies its overhead costs to jobs using the hours of service provided as the allocation base. For example, this year and last year, 49 service-hours were required to maintain the website for a small company called Verde Consulting. All of Platinum's overhead costs are fixed, and the actual overhead cost incurred was exactly as estimated at the beginning of the year in last year and this year.

Required:

1. Platinum Web Services computes its predetermined overhead rate at the beginning of each year based on the estimated overhead cost and the estimated hours of service demanded for the year. Using this approach, how much overhead would have been applied to the Verde Consulting job last year? How about this year?

2. The president of Platinum Web Services has heard that some companies in the industry have changed to a system of computing the predetermined overhead rate based on the hours of service available at capacity. He would like to know what effect this method would have on job costs. How much overhead cost would have been applied to the Verde Consulting job last year using this method? How much would have been applied this year?

3. If Platinum computes its predetermined overhead rate based on the hours of service available at capacity as in (2) above, how much unused capacity cost would the company have incurred last year? This year?