Activity Based Costing:

Vid-saver, Inc. has five activity cost pools and two products (a budget tape rewinder and a deluxe tape rewinder). Information is presented below:

Cost Drivers by Product

Activity Cost Pool Cost Driver Est. Overhead Budget Deluxe

Ordering and Receiving Orders $ 110,000 600 400

Machine Setup Setups 297,000 500 400

Machining Machine hours 1,000,000 150,000 100,000

Assembly Parts 1,200,000 1,200,000 800,000

Inspection Inspections 300,000 550 450

Instructions

a. Compute the overhead cost per unit for each product. Production is 700,000 units of Budget and 200,000 units of Deluxe. Round your answer to the nearest cent.

b. How can the analysis done in part (a) above help management?