Cartwright Ltd. manufactures two models of saddles, the Jordan and the Shenandoah. The Jordan is a more basic model and sells for $900. The Shenandoah is a professional- model saddle and sells for $1,500. At the beginning of the year, the following budgeted data were available:

1. Calculate the cost per unit for each product assuming the company uses a single overhead allocation rate based on direct labour-hours.

2. Form homogeneous cost pools and select appropriate cost drivers. Explain the rationale behind each of your groupings. Calculate the activity rates.

3. Using the activity rates calculated in requirement 2, calculate the per-unit cost for each product.

4. Compare your results from requirements 1 and 3, and comment on your results.

PLEASE ANSWER QUESTIONS 1-4

The following are the budgeted indirect costs for the year: Facility-level costs are allocated on the basis of machine-hours