Addison develops software for internet applications. The market is very competitive, and Addison's competitors continue to ntroduce new products at low prices. Addison offers a wide variety of software - from simple programs that enable new users to create personal webpages to complex commercial search engines. Like most software companies, Addison's raw material costs are insignificant Addison has just hired Nicole Merrell, a recent university graduate in acc Manager Jeff Gire to join her in a pilot activity based costing study. Merre related costs, and cost-allocation bases: (Click the icon to view the information.) Requirements Requirement 1. Compute the cost allocation rate for each activity. Determine the formula and then compute the cost allocation rate for each activity. (Round your answers to the nearest cent.) Activity overhead rate Appl. Dev. 1 I application /line Content prod. 1 / hour 1 Testing Requirement 2. Use the activity-based cost allocation rates to compute the indirect cost of each unit of X-Page and X-Secure. (Hint: Compute the total activity costs allocated to each product line and then compute the unit to the nearest cent.) X-Page X-Secure Applications development Content production Testing Total costs Number of units Per unit cost Requirement 3. Addison's original single-allocation-based costing system allocated indirect costs to products at $32 per programmer hour. X-Page requires 24,000 programmer hours, while X-Secure requires 36,000 programmer hours. Compute the total indirect costs allocated to X-Page and X-Secure under the original system. Then, compute the indirect cost per unit for each product. First, compute the total indirect costs allocated to X-Page and X-Secure under the original single-allocation-based system. Select the formula and then enter the amounts and calculate the indirect cost allocated. Indirect cost Product allocated X-Page X X-Secure Now compute the indirect cost per unit for each product under the original single-allocation-based system. Begin with X-Page and then compute X-Secure. (Round the cost per unit to the nearest cent.) X-Page X-Secure Total indirect costs allocated Number of units Per unit cost Requirement 4. Compare the activity-based costs per unit to the costs from the simpler original system. How have the unit costs changed? Explain why the costs changed as they did. The original system X-Page and X-Secure. times as many lines of code and times as much testing as X-Page. The ABC system this difference and allocates The original system allocated overhead to X-Secure than to X-Page. However, X-Secure required of the content production and testing costs to X-Secure. Requirement 4. Compare the activity-based costs per unit to the costs from the simpler original system. How have the unit costs changed? Explain why the costs changed as they did The original system X-Page and X-Secure times as many lines of code and times as much testing as X-Page. The ABC system this difference and alloca The original system allocated overhead to X-Secure than to X-Page. However, X-Secure required of the content production and testing costs to X-Secure. Requirement 5. What are the clues that Addison's ABC system is likely to pass the cost-benefit test? Addison's different software applications use Addison has costs Addison produces Addison is in Addison has Estimated Estimated Indirect Allocation Quantity of Activity Activity Costs Base Allocation Base $ 3,680,000 New applications 8 new applications Applications development Content production 17 million lines Testing .. 2,550,000 Lines of code 232,500 Testing hours 6,462,500 1,500 testing hours $ Total indirect costs.. Addison is planning to develop the following new applications: X-Pagesoftware for developing personal webpages X-Secure-commercial security and firewall software X-Page requires 520,000 lines of code and 110 hours of testing, while X-Secure requires 5.2 million lines of code and 550 hours of testing. Addison expects to produce and sell 65,000 units of X-Page and 15 units of X-Secure