Aerotech produces three products of printed circuit boards referred to as Model I, Model II$,$ and

Model III. The complexity and quality of these products increase as the number of model

increases.

$$ The company determine the selling price of each product by adding $25\%$ markup above the

total production cost per unit.

$$ Aerotech uses traditional normal costing system and applies FOH to each product based on DL

hours. The following information is obtained from the company's records:

o Budgeted total Factory Overhead $=$ $$3,894,000$

o Budgeted Direct Labor Hours $=118,000$

o Budgeted Machine hours $=43,000$ hours

o Direct labor wage rate is $$20/$hour$.$

Model I Model II Model III

Production:

Units

Runs $($batches$)$

$10,000$

$1$ of $10,000$

$20,000$

$4$ of $5000$

$4,000$

$10$ of $400$

DM$/$unit $$50$ $$90$ $$20$

DL hours$/$unit $3$ hours $4$ hours $2$ hours

Setup time $($hours$/$run$)10$ hours $10$ hours $10$ hours

Machine time $($hours$/$unit$)1$ hour $1\mathrm{.}25$ hours $2$ hours

Following are detailed data about the FOH costs:

Cost Pool

Machine Operating costs

Costs

$$1,212,600$

Allocation Base

Machine hours

Setup Costs $3,000$ Number of runs

Engineering Costs $700,000$ Time spent on each product

General Facility Costs $507,400$

$(25\%$ model I, $45\%$ model II$,$ and $30\%$ model III$)$

Direct Labor Hours

Other FOH Costs:

Receiving$/$Inspection $200,000$ Time spent on each product

Material Handling $600,000$

$(6\%$ model I, $24\%$ model II$,$ and$70\%$ model III$)$

Time spent on each product

$(7\%$ model I, $30\%$ model II$,$ and $63\%$ model III$)$

Quality Inspection $421,000$ Time spent on each product

$(20\%$ model I, $40\%$ model II$,$ and $40\%$ model III$)$

Packaging $250,000$ Time spent on each product

$(4\%$ model I, $30\%$ model II$,$ and $66\%$ model III$)$

Total FOH $3,894,000$

Required:

Determine the total Production Cost and selling price for each product under:

$1.$ Traditional Costing System, using DL Hours as an allocation base.

$2.$ ABC Costing System