A company that assembles televisions has the following indirect activities, costs and cost drivers:

Activity Costs Cost driver

Design $500,000 Number of products

Parts storage $100,000 Number of unique parts

Batch set-up $300,000 Number of batches

Assembly $500,000 Total direct labor dollars

Inventory storage $100,000 Number of units

The company makes two different televisions (regular and high definition) with the following characteristics:

Regular High Definition

Number of units manufactured & sold 10,000 2,000

Average units in inventory 400 100

Direct material cost per unit $100 $200

Direct labor cost per unit $50 $50

Number of batches 30 30

Number of unique parts 200 800

a. If the company is following a differentiation strategy, which is the most critical activity?

______________________

b. What is the application rate for batch set-up? _____________

c. What is the cost of making the 2000 high definition televisions?

Direct materials _____________ Direct labor __________________

Design _____________ Parts storage _________________

Batch set-up _____________ Assembly ________________

Inventory storage _____________

d. What is the total cost of making the 2000 high definition televisions under a traditional accounting system using direct labor dollars to allocate all of the overhead activity costs?