Activity-based department rate product costing and product cost distortions Pro Audio Inc. manufactures two products: receivers and loudspeakers. The factory overhead incurred is as follows: wrfm11h_ch26_pr26_3b1.gif 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: wrfm11h_ch26_pr26_3b2.gif The activity-base usage quantities and units produced for the two products are shown below. wrfm11h_ch26_pr26_3b3.gif 1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is $275,000 and $225,000 for the Subassembly and Final Assembly departments, respectively. Department Production department rate Subassembly Department 275 $ per direct labor hour Final Assembly Department 225 $ per direct labor hour 2. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). Product Total factory overhead Factory overhead per unit Receivers: $ $ Loudspeakers: $ $ 3. Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. Activity Activity rate Setup $ per setup Quality Control $ per inspection Subassembly Department $ per direct labor hour Final Assembly Department $ per direct labor hour 4. Determine the total and per-unit cost assigned to each product under activity-based costing. Round the per unit amounts to the nearest whole cent. Product Total Activity Cost Activity Cost per Unit Receivers $ $ Loudspeakers: $ $ 5. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate method and activity-based costing methods. The input in the box below will not be graded, but may be reviewed and considered by your instructor.