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Addy Company makes two products: Product A and Product B. Annual production and sales are 2,500 units of Product A and 2,100 units of Product

Addy Company makes two products: Product A and Product B. Annual production and sales are 2,500 units of Product A and 2,100 units of Product B. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.20 direct labor hours per unit and Product B requires 0.70 direct labor hours per unit. The total estimated overhead for next period is $169,720.

The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools--Activity 1, Activity 2, and General Factory--with estimated overhead costs and expected activity as follows:

Expected Activity
Activity Cost Pool Estimated Overhead Costs Product A Product B Total
Activity 1 $60,225 2,600 1,050 3,650
Activity 2 27,740 2,500 420 2,920
General Factory 81,755 750 1,260 2,010
Total $169,720

(Note: The General Factory activity cost pool's costs are allocated on the basis of direct labor hours.)

The overhead cost per unit of Product B under the activity-based costing system is closest to:

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