Exercise 3) Activity-Based Costing Apricot Co. produces only two products: a major computer part and cell phones. The company uses a normal cost system and overhead costs are currently allocated using a plant-wide overhead rate based on direct labor hours. Outside cost consultants have recommended, however, that the company use activity-based costing to charge overhead to products. The company expects to produce 6,000 computer parts and 2,000 cell phones next year. Each computer part requires one hour and a half of direct labor to produce and each cell phone requires one-half hour to produce. The direct material and direct labor costs included in the two products are as follows: Item Direct Material (per unit) Direct Labor (per unit) Computer Part $30 $15 Cell-Phone $18 $5 Estimated Total Factory Overhead Data for next year is summarized in the following table: Activity Production Setups Material Handling Packaging and Shipping Total Factory Overhead Budgeted Overhead Dollars $120,000 $90,000 $180,000 $390,000 Estimated Volume Level 20 setups 5,000 lbs. 6,000 boxes Based on an analysis of the three overhead activities, it is estimated that next year the two products would require these activities as follows: Activity Production Setups Material Handling Packaging and Shipping Computer Parts 5 setups 2,000 lbs. 4,500 boxes Cell Phones Overall Totals 15 setups 20 setups 3,000 lbs. 5,000 lbs. 1,500 boxes 6,000 boxes Required: a) Calculate the amount of Factory Overhead apportioned to each product using a plant-wide rate based on direct labor hours. b) Calculate the activity cost rates for (a) setups, (b) material handling and (c) packaging and shipping. c) Cost out the two products (on a per unit bases) using an activity-based costing system