A.Reitler, Inc., manufactures and sells two products: Product A2 and Product N7. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:

Expected Production

Direct Labor-Hours Per Unit

Total Direct Labor-Hours

Product A2

100

7.0

700

Product N7

800

9.0

7,200

Total direct labor-hours

7,900

The direct labor rate is $26.80 per DLH. The direct materials cost per unit for each product is given below:

Direct Materials Cost per Unit

Product A2

$151.60

Product N7

$205.00

The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

Activity Cost Pools

Activity Measures

Estimated Overhead Cost

Expected Activity

Product A2

Product N7

Total

Labor-related

DLHs

$

361,267

700

7,200

7,900

Product testing

Tests

49,777

300

400

700

Order size

MHs

263,736

4,500

4,300

8,800

$

674,780

Required:

In all computations involving dollars in the following requirements, round off your answer to the nearest whole cent.

1. The company currently uses a traditional costing method in which overhead is applied to products based solely on direct labor-hours. Compute the company's predetermined overhead rate under this costing method.

2. How much overhead would be applied to each product under the company's traditional costing method?

3. Determine the unit product cost of each product under the company's traditional costing method.

4. Compute the activity rates under the activity-based costing system.