Driver Take Home Practice 7-2 Daniels Inc. produces two types of diffusers, basic and digital. The digital version allows for programming and timers. Daniels currently uses a company-wide OH rate and has told their sales force to really push the Digital product. Daniels CFO has noticed that the income is not increasing as much as she thought it should and is considering using ABC to get a better idea of the costs of each product. The following activities, drivers, and amount of the driver per product is given in the chart below: Driver Usage per Product Activity Cost Basic Digital Materials handling Number of parts $16,550 2,000 1,310 Machine setup Number of setups 5,100 6 4 Assembling Assembling hours 127,400 1,600 220 Order processing Number of orders 3,200 2 2 Additional information: Sales price per unit $30.00 $55.00 Direct labor hours per unit 9 hours 1.5 hours Number of units 10,000 1,000 Direct materials cost $22,000 $4,000 Direct labor cost $17,500 $3,000 Required: 1. Compute the cost per unit and the gross profit per unit for Basic and Digital using traditional costing and direct labor hours to apply overhead. 2. Compute activity rates for each activity using ABC. 3. Compute the total cost of each activity allocated to the two products. 14. compute the cost per unit and the gross profit per unit using ABC 5. Based on comparing results under traditional and ABC, what are some things Daniels might consider