1. Boxcar Electronics uses the same machinery to produce multiple products. Total overhead cost for the company is $1,800,000. 72,000 direct labor hours were used during the year. The following additional information was found in the companys records:

Product A All Other Products Total

Units produced 3,500 659,000 662,500

Direct material cost $ 50,000 $ 4,450,000 $ 4,500,000

Direct labor cost $ 12,000 $ 488,000 $ 500,000

Machine hours 16,500 733,500 750,000

Direct labor hours 2,200 69,800 72,000

Engineering changes per year 5 295 300

Production set-ups 30 2,470 2,500

Given the technological nature of these products, the company periodically modifies the products to meet customer-specific needs. Engineering overhead costs incurred to make these product changes total $480,000 per year. Each production run also requires a unique set-up for each product. Total set-up charges of $420,000 are included in manufacturing overhead. Other major activities, their total overhead costs, and related cost drivers are purchasing $315,000, material costs; production, $585,000, direct labor hours.

Calculate the cost of Product A using the traditional method of overhead allocation.

Estimate the products overhead cost per unit using each of the following four possible allocation bases:

Direct material cost

Direct labor cost

Machine hours

Direct labor hours

Calculate the total cost and unit cost of Product A using activity-based costing.