Activity-Based Department Rate Product Costing and Product Cost Distortions Big Sound Inc. manufactures two products: receivers and loudspeakers. The factory overhead incurred is as follows: Indirect labor Subassembly Department Final Assembly Department Total $400,400 198,800 114,800 $714,000 The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: Activity Setup Budgeted Activity Cost Activity Base $138,600 Number of setups Quality control Total 261,800 $400,400 Number of inspections The activity-base usage quantities and units produced for the two products follow: Direct Labor Direct Labor Number of Setups Number of Inspections Hours- Subassembly Hours-Final Units Assembly Produced Receivers 80 450 875 525 7,000 Loudspeakers 320 1,750 525 875 7,000 Total 400 2,200 1,400 1,400 14,000