Grand Antitheft Auto Incorporated sells two vehicle antitheft devices, Secured and Ultra-Secured. The Secured is their best-selling product, with projected sales fo 25,000 units annually. THe newer Ultra-Secured is still building market share, with projected sales of only 5,000 units annually. Direct materials for the devices are $40 and $30, respectively. Each unit takes one hour of direct labor to produce, and production workers are paid at the rate of $12,50 per hour. Grand uses normal job costing, with a single indirect cost pool, Manufacturing Overhead, with they allocate based on direct manufacturing labor hours. They budget their total indirect costs to be $2,000,000 in 2020. The newly hired CFO wants the company to shift to a more modern activity-based costing system in the belief it will result in better information and better decisions. Accordingly, they examine the production process and isolate three separate activities: setting up the machines prior to production runs; machining during the actual production run; and inspecting products before transfer to Finished Goods Inventory. They identify the cost drivers for each activity as follows: number of setups drives costs associated with setting up the machines, number of machine hours drives the cost of machining; and the number of inspections drives the cost of inspections. Using these cost drivers, they are able to split their total indirect cost pool into the following: Setup Costs $600,000 Machining Costs 950,000 Inspections Costs 450.000 Total Indirect Costs $2,000,000 The CFO anticipates 500 setups for the Secured and 1.500 for the Ultra-Secured: 30,000 and 20,000 machine The newly hired CFO wants the company to shift to a more modern activity-based costing system in the belief it will result in better information and better decisions. Accordingly, they examine the production process and isolate three separate activities: setting up the machines prior to production runs; machining during the actual production run; and inspecting products before transfer to Finished Goods Inventory. They identify the cost drivers for each activity as follows: number of setups drives costs associated with setting up the machines; number of machine hours drives the cost of machining; and the number of inspections drives the cost of inspections. Using these cost drivers, they are able to split their total indirect cost pool into the following: Setup Costs $600,000 Machining Costs 950,000 Inspections Costs 450.000 Total Indirect Costs $2,000,000 The CFO anticipates 500 setups for the Secured and 1.500 for the Ultra-Secured: 30,000 and 20,000 machine hours, respectively, and 1.200 and 1,300 inspections respectively. 1. For the current year, calculate product costs in total and per unit", for each product, using the traditional costing method 2. For the current year, calculate product costs, in total and per unit', for each product line, as if the company had had an activity-based costing system in place. 3. Provide a brief analysis of the impact on Grand Antitheft Auto Inc. of switching to the activity-based costing system 'For total costs, round to the nearest whole dollar, for per-unit costs, round to the nearest penny
