ABC Versus ABM

Whitaker Company produces two models of blenders for restaurants: the Super Model (priced at $402) and the Special Model (priced at $204). Recently, Whitaker has been losing market share with its Special Model because of competitors offering blenders with the same quality and features but at a lower price. A careful market study revealed that if Whitaker could reduce the price of its Special Model to $185, it would regain its former share of the market. Management, however, is convinced that any price reduction must be accompanied by a cost reduction of the same amount so that per-unit profitability is not affected. James Davis, company controller, has indicated that poor overhead costing assignments may be distorting management's view of each product's cost and, therefore, the ability to know how to set selling prices. James has identified the following overhead activities: machining, inspection, and rework. The three activities, their costs, and practical capacities are as follows:

Activity	Cost	Practical Capacity
Machining	$5,321,800	90,200 machine hours
Inspection	3,408,600	43,700 inspection hours
Rework	1,735,500	44,500 rework hours

The consumption patterns of the two products are as follows:

	Special	Super
Units	100,000	25,500
Machine hours	50,000	40,200
Inspection hours	9,600	34,100
Rework hours	8,000	36,500

Whitaker assigns overhead costs to the two products using a plantwide rate based on machine hours.

Required:

1. Calculate the unit overhead cost of the Special Model using machine hours to assign overhead costs. Round intermediate calculations and your final answer to the nearest cent, if rounding is required. $fill in the blank 1 per unit

Now, repeat the calculation using ABC to assign overhead costs. Round intermediate calculations and your final answer to the nearest cent, if rounding is required. $fill in the blank 2 per unit