BIG Xl Company, manufactures three different products, BIGlX, BIG2X, and BIG3X. Management has become concerned about the accuracy of its costing system.

	Prod1x	prod2X	Prod3x
The company expected to produce and sell the following units of each product	1500	2000	5000
Direct labor hours required to produce one unit of each product.	4	5	4.50
Overhead is applied to products on the basis of direct labor-hours.
At the beginning of the current year, management estimated overhead costs of 800,000

Required:

a. Compute the predetermined overhead rate using direct labor-hours as the basis for allocating overhead costs to products.

b. Compute the manufacturing overhead cost per unit of each product.

The company is considering using activity-based costing to cost its products. A team was formed to investigate this idea. The team recommends that three activity cost pools be used. These cost pools and their associated activities are listed as follows :

	Estimate	Expected activity for products
Activity Cost Pool and (Activity Measure)		Prod1x	Prod2x	Prod3x	Total
Overhead C
Purchase orders (number of orders)	$20,000	100	300	400	800
Product testing (number of tests)	300,000	1400	1200	2400	5000
Machine-related (machine-hours)	480000	1000	2500	4500	8000
	800.000

1. Compute the activity rate for each activity cost pool.
2. Using activity-based costing, do the following: Determine the total overhead that would be assigned to each product.
3. Compute the manufacturing overhead cost per one unit for each model.
4. Discuss at least two management decisions that would be impacted assuming the activity-based costing information provides more accurate costing than using the single rate as before. Mention specific products in your discussion
5. Discuss at least two management decisions that would be impacted assuming the activity-based costing information provides more accurate costing than using the single rate as before. Mention specific products in your discussion. (4 points)