Asbury Coffee Enterprises (ACE) manufactures two models of coffee grinders: Personal and Commercial. The Personal grinders have a smaller capacity and are less durable than the Commercial grinders. ACE only recently began producing the Commercial model. Since the introduction of the new product, profits have been steadily declining, although sales have been increasing. The management at ACE believes that the problem might be in how the accounting system allocates costs to products.

The current system at ACE allocates manufacturing overhead to products based on direct labor costs. For the most recent year, which is representative, manufacturing overhead totaled $2,185,500 based on production of 30,000 Personal grinders and 10,000 Commercial grinders. Direct costs were as follows:

	Personal	Commercial	Total
Direct materials	$ 1,453,800	$ 732,750	$ 2,186,550
Direct labor	1,041,000	780,250	1,821,250

Management has determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year are as follows:

Cost Driver	Costs Assigned	Activity Level		Total
		Personal	Commercial
Number of production runs	$ 1,057,500	50	25	75
Quality tests performed	864,000	15	25	40
Shipping orders processed	264,000	150	50	200
Total overhead	$ 2,185,500

Required:

A. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product?

	Overhead	Total Cost per Unit
Personal
Commercial

B. How much overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product?

	Overhead	Total Cost per Unit
Personal
Commercial