Case Analysis 1: Unit 4 Digital Solutions, Inc., manufactures two component parts for the television industry: Voltage Regulator: Annual production and sales of 50,000 units at a selling price of $52.50 per unit. Mother Board: Annual production and sales of 25,000 units at a selling price of $72 per unit. Digital Solutions includes all R&D and design costs in engineering costs. Assume that Digital Solutions has no marketing, distribution, or customer-service costs. The direct and overhead costs incurred by Digital Solutions on the Voltage Regulator and Mother Board are described as follows: Direct materials costs (variable) Direct manufacturing labor costs (variable) Direct machining costs (fixed) Manufacturing overhead costs: Machining setup costs Testing costs Engineering costs Manufacturing overhead costs Total costs Voltage Mother Regulator Board Total $1,020,000 $720,000 $1,740,000 360,000 240,000 180,000 120,000 600,000 300,000 112,500 600,000 480,000 $1,192,500 $3,832,500 Digital Solution's management identifies the following activity cost pools, cost drivers for each activity, and the costs per unit of cost driver for each overhead cost pool: $30 per setup-hour Activity Description Cost Driver Cost per Unit of Cost Driver Setup Preparing the machine to manufacture Setup hours a new batch of products Testing Testing components and final product Testing hours (each unit is tested individually) Engineering Designing products and processes and ensuring their smooth functioning $2.40 per testing hour Complexity of product and Costs assigned to products by special process study BUSI 3413: INTERMEDIATE MANAGERIAL ACCOUNTING