Activity Based Costing. RSS, Inc. produces two products; the R-Audio tabletop radio/cd player, and the R-Man MP3 Player. The R-Audio product is a high volume standard unit. The R-Man is made in smaller batches, with frequent changes in design and features to meet market demand. RSSs traditional costing system uses direct labor hours to allocate overhead to the products. Budgeted and actual direct labor hours were identical for the year. The company is interested to find out how the product costs would change if they used an activity-based system. Consider the following: Total Overhead: $900,000 Labor Hours: R-Audio 60,000 R-Man 30,000 Units Produced: R-Audio 60,000 R-Man 45,000 Direct Material Cost R-Audio $1,200,000 R-Man $ 900,000 Total Labor Cost $ 810,000 Activity-Based Information:

Cost R-Audio R-Man

Unit Level (# of units) $200,000 60,000 45,000

Batch (# of setups) $400,000 100 300

Product (engineer hours) $200,000 1,000 3,000

Facility (square feet) $100,000 25,000 25,000

Total $900,000

The current selling price for R-Audio is $46.80, and R-Mans is $40.85

Compute the unit cost and gross margin for each product using the volume-based (labor hours) traditional costing system.