ABC company produces two models of trampolines for backyard fun. The Original, and the recently introduced Deluxe. Currently, the company uses direct labor hours as the basis for applying overhead. The company estimates that it will incur $500,000 in overhead costs in the next year.

The following cost data is known:

	Original	Deluxe
Direct Materials	$40	$70
Direct Labour	30	40
Number of units produced	8,000 units	3,000 units

The CFO wishes to explore an activity-based costing system

Activity (Cost Driver)	Estimated MOH	Expected Activity
		Total	Standard	Deluxe
Assembly (Labour Hours)	$200,000	20,000	15,000	5,000
Receiving (Receiving Reports)	300,000	5,000	3,000	2,000
Testing (Number of Tests)	400,000	1,000	300	700
	$900,000

Required:

Question 1

Under the traditional costing method:

a). Compute the predetermined overhead rate.

b). Determine the unit cost of each product.

Question 2

Under activity-based costing:

a). Compute the activity rates for each activity.

b). Determine the expected unit cost of each product.