3. Using the current costing system, calculate the cost per unit for Model M-11 and for Model R-24. Assume no beginning or ending inventory. Show your calculations.

4. Using activity-based costing, calculate the cost per unit for Model M-11 and for Model R-24. Assume no beginning or ending inventory. Show your calculations.

Smart Electronics manufactures two types of gaming consoles, Models M-11 and R-24. Currently, the company allocates overhead costs based on direct labor hours; the total overhead cost for the past year was 80,000. Additional cost information for the past year is presented below. Direct Costs Product Total Direct Labor Name Units Sold Selling Price per Unit Hours Used per Unit M-11 650 1,300 10 90 R-24 150 1,500 30 60 Recently, the company lost bids on a contract to sell Model M-11 to a local wholesaler and was informed that a competitor offered a much lower price. Smart's controller believes that the cost reports do not accurately reflect the actual manufacturing costs and product profitability for these gaming consoles. He also believes that there is enough variation in the production process for Models M-11 and R-24 to warrant a better cost allocation system. Given the nature of the electronic gaming market, setting competitive prices is extremely crucial. The controller has decided to try activity-based costing and has gathered the following information. Number of Setups Number of Components Number of Material Movements M-11 3 17 15 R-24 7 33 35 Total activity cost 20,000 50,000 10,000 The number of setups, number of components, and number of material movements have been identified as activity-cost drivers for overhead. Required: 1. How is Smart currently allocating its overhead? Is it traditional, refined, or activity based costing system? 2. Give one advantage and one disadvantage for using the current costing system. 3. Using the current costing system, calculate the cost per unit for Model M-11 and for Model R-24. Assume no beginning or ending inventory. Show your calculations. 4. Using activity-based costing, calculate the cost per unit for Model M-11 and for Model R-24. Assume no beginning or ending inventory. Show your calculations. 5. Identify and explain two advantages and two limitations of activity-based costing