Abierto produces two products: a handcrafted soft leather handbag sold under the label Manta Elegant and a leather handbag produced largely through automation and sold under the label Manta Bien. The two products use two overhead activities, with the following costs:

Setting up equipment	$6 600
Machining	$9 000

The manager has collected the expected annual prime costs for each handbag, the machine hours, the setup hours and the expected production.

	Elegant	Bien
Direct labour	$18 000	$6 000
Direct material	$6 000	$6 000
Units	6 000	6 000
Machine hours	1 000	9 000
Setup hours	200	200

Required:

1. Calculate the overhead cost per-unit for each handbag by using a plant-wide rate based on direct labour costs.
2. Calculate the overhead cost per-unit for each handbag by using overhead rates based on machine hours and setup hours.
3. Comment which of the two approaches in (i) and (ii) above assign overhead costs more accurately. Justify your answer.