Carter Company manufactures two products, Deluxe and Regular, and uses a traditional two-stage cost allocation system. The first stage assigns all factory overhead costs to two production departments, A and B, based on machine hours. The second stage uses direct labor hours to allocate overhead to individual products.

For the current year, the firm budgeted $1,000,000 total factory overhead cost. The $1,000,000 was for the planned levels of machine and direct labor hours shown in the following table.

Production Department AProduction Department BMachine hours4,00016,000Direct labor hours20,00010,000

The following information relates to the firms operations for the month of January:

DeluxeRegularUnits produced and sold200800Unit cost of direct materials$ 100$ 50.00Hourly direct labor wage rate$ 25$ 20Direct labor hours in Department A per unit22Direct labor hours in Department B per unit11

Carter Company is considering implementing an activity-based costing system. Its management accountant has collected the following information for activity cost analysis for the current year:

ActivityBudgeted OverheadCost DriverBudgeted QuantityDriver ConsumptionDeluxeRegularMaterial movement$ 7,000Number of production runs3501520Machine setups400,000Number of setups5002550Inspections588,000Number of units19,600200800Shipment5,000Number of shipments25050100 $ 1,000,000

Required:

1. Calculate the unit cost for each of the two products under the existing volume-based costing system.

2. Calculate the overhead per unit of the cost driver under the proposed ABC system.

3. Calculate the unit cost for each of the two products if the proposed ABC system is adopted.