ABC Firm produces two products. Product A is a high-end product that requires more direct labour and better materials. Product A sells for $150 per unit. Product B is sold in vast quantities and is made in huge production runs. Product B sells for $60 per unit. At the beginning of 2016, ABC made the following estimations and at the end of the year, the following actual amounts were recorded.

Estimates Actuals

Sales of Product A 6,000 units 6,150 units

Sales of Product B 82,300 units 81,400 units

Direct labour hours 31,890 33,480

Machine hours 177,030 166,600

Direct labour $732,340 $792,310

Direct materials 863,620 858,200

Overhead 1,457,000 1,491,200

Resource usage for the two products per unit is:

Product A Product B

DL hours 1.2 .3

Machine hours .7 2.1

DL$ $42.50 $5.80

DM$ 15.00 9.40

1. Assume that overhead is applied on the basis of DL hours. Compute the cost per unit and the gross margin per unit for each product.
2. Assume that overhead is applied on the basis of machine hours. Compute the cost per unit and the gross margin per unit for each product.
3. Compute overhead over or under applied for each overhead application base.