Direct material cars: $$5,000$ watches: $$1,000$

labor hours cars: $9$ watches: $3$

labor rate per hour cars: $$20$ watches: $$20$

number made and sold cars: $2000$ watches: $7000$

overhead:

rent on factory where both are made: $$300,000$

lathe: $$100,000$

diagnostic machine: $$100,000$

inspection: $$200,000$

Total overhead: $$700,000$

$1.$ Determine the cost of a car and a watch if the company uses labor hours to allocate overhead.

$2.$ The company decided to use activity based costing and determined the following:

rent labor hours

lathe $1$ hour per watch and $3$ hours per car

diagnostic machine $2$ hours per watch and $2$ hours per car

inspection $1$ hour per watch and $1/2$ hour per car

Determine the cost of a car and a watch using activity based costing