Commonwealth Devices makes three wearable fitness devices at its Lake Plant: CFit$-1,$ CFit$-2,$ and CFit$-$Xtra. The company has for

many years allocated overhead to products using machine$-$hours. Last year, the Lake Plant produced and shipped $8,220$ units of CFit$-1,$

$14,660$ units of CFit$-2,$ and $8,220$ units of CFit$-$Xtra. The plant recorded the following revenues and costs:

The Lake Plant has put together an employee team to recommend a possible activity$-$based cost system, including cost allocation

bases. The employee team recommends the following:

The employee team further recommends that administration costs not be allocated to products.

Required:

a$.$ Using machine$-$hours to allocate overhead, complete the income statement for the Lake Plant. Do not allocate administrative costs

to products.

b$-1.$ Compute the cost driver rates.

b$-2.$ Complete the income statement using the activity$-$based costing method suggested by the employee team.

The costs attributed to production are $$2,983,500,$ and the costs attributed to engineering are $$994,500.$ After discussion with plant engineers, the team decides that although machine$-$hours are an appropriate cost driver for production, the best cost driver for engineering is setups because most of the work arises from changes in the way the product is run.

Required:

a$-1.$ Compute the totals of the cost driver rates shown below.

a$-2.$ What unit product costs will be reported for the two products if the revised ABC system is used?