ADA Pharmaceutical Company produces three drugsDiomycin, Homycin, and Addolinbelonging to the analgesic (pain-killer) family of medication. Since its inception four years ago, ADA has used a direct labor hourbased system to assign manufacturing overhead costs to products.

Eme Weissman, the president of ADA Pharmaceutical, has just read about activity-based costing in a trade journal. With some curiosity and interest, she asked her financial controller, Takedo Simon, to examine differences in product costs between the firms current costing and activity-based costing systems.

ADA has the following budget information for the year:

	Diomycin	Homycin	Addolin
Cost of direct materials	$ 215,000	$ 275,000	$ 268,000
Cost of direct labor	260,000	244,000	273,000
Number of direct labor hours	7,300	6,900	2,100
Number of capsules	1,100,000	510,000	310,000

ADA has identified the following activities and cost drivers and has assigned them a total overhead cost of $205,000.

Activity	Cost Driver	Budgeted Overhead Cost	Budgeted Cost Driver Volume
Machine setup	Setup hours	$ 17,000	1,700
Plant management	Number of Workers	37,000	1,300
Supervision of direct labor	Direct labor hours	47,000	17,000
Quality inspection	Inspection hours	51,400	1,100
Order expediting	Customers served	52,600	695
Total overhead		$205,000

Takedo selected the cost drivers with the following justifications:

SETUP HOURS: The cost driver of setup hours is used because the same product takes about the same amount of setup time regardless of size of batch. For different products, however, the setup time varies.

NUMBER OF WORKERS: Plant management includes plant maintenance and corresponding managerial duties that make production possible. This activity depends on the number of workers. The more workers involved, the higher the cost.

DIRECT LABOR HOURS: Supervisors spend their time supervising production. The amount of time they spend on each product is proportional to the direct labor hours worked.

INSPECTION HOURS: Inspection involves testing a number of units in a batch. The time varies for different products but is the same for all similar products.

NUMBER OF CUSTOMERS SERVED: The need to expedite production increases as the number of customers served by the company increases. Thus, the number of customers served by ADA is a good measure of expediting production orders.

Takedo gathered the following information about the cost driver volume for each product:

	Diomycin	Homycin	Addolin
Setup hours	250	650	850
Number of workers	250	450	650
Direct labor hours	7,300	6,900	2,100
Inspection hours	200	250	750
Customers served	55	110	550

Required:

1. Use the firms current direct labor hourbased costing system to calculate the unit cost of each product.

2. Use the activity-based costing system to calculate the unit cost of each product.

Use the firm's current direct labor hour-based costing system to calculate the unit cost of each product. (Round your intermediate calculations and final answers to two decimal places.) Use the activity-based costing system to calculate the unit cost of each product. (Round intermediate calculations to 2 decimal places. Round "Cost per capsule" to 2 decimal places.)