Believing that its traditional cost system may be providing misleading information, Missoula Corporation is considering an activity-based costing (ABC) approach. Missoula Corporation employs a full-cost system and has been applying its manufacturing overhead on the basis of machine hours. The organization plans on using 50,000 direct labor hours and 30,000 machine hours in 2014. The following data show the manufacturing overhead that is budgeted:

 

a. Compute the per-unit cost for this product for 2014 if Missoula uses the traditional full-cost system.

b. Compute the per-unit cost for this product for 2014 if the Missoula employs an activity-based costing system.

c. Assume the company wishes to achieve a gross profit rate of 40 percent. Determine the selling price that would be required based on your answers to (a) and (b).

Budgeted Cost Driver Budgeted Activity Cost Activity Material handling Setup costs Machining costs Quality control Number of parts handled Number of setups Machine hours Number of batches 6,000,000 750 30,000 500 $ 720,000 315,000 540,000 225,000 $1,800,000 Total manufacturing overhead cost Cost, sales, and production data for one of the company's products for the coming year are as follows: Direct material cost per unit Direct labor cost per unit (0.05 DLH @ $15 per DLH) $4.40 0.75 $5.15 Sales and production data: Expected sales Batch size Setups Total parts per finished unit Machine hours required 20,000 units 5,000 units 2 per batch 5 parts 80 MHs per batch