Exercise 5-6A Computing overhead rates based on different cost drivers Snowden Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity-based costing to allocate overhead costs. It has identified four activity pools. Relevant information follows. Activity Pools Cost Pool Total Cost Driver $104,000 168,000 12,000 Number of units produced Number of programming hours Number of inspections Repair and maintenance on assembly machine Programming cost Software inspections Product testing 16,000 Number of tests $300,000 Total overhead cost Expected activity for each product follows. Number of Number Programming Number of Number of Units Hours Inspections of Tests Decoder P 16,000 2,000 190 1,400 60 Decoder Q 36,000 1,500 3,500 1,100 Total 52,000 250 2,500 Required a. Compute the overhead rate for each activity pool. b. Determine the overhead cost allocated to each product. Exercise 5-7A Comparing an ABC system with a traditional costing system Use the information in Exercise 5-6A to complete the following requirements. Assume that before shift ing to activity-based costing, Snowden Industries allocated all overhead costs based on direct labor hours. Direct labor data pertaining to the two decoders follow. Direct Labor Hours Decoder P 8,000 16,000 Decoder Q Total 24,000 8 s Cost Management in an Automated Business Environment: ABC, ABM, and TQM 229 Required Compute the amount of overhead cost allocated to each type of decoder when using direct labor a. hours as the allocation base. b. Determine the cost per unit for overhead when us ing direct labor hours as the allocation base and when using ABC. Round your figures to two decimal points c. Explain why the perunit overhead cost is lower for the high-volume product when using ABC