Harris systems specializes in servers for workgroup, commerce, and ERP applications. The company's original job costing system has two direct cost categories: direct materials and direct labor. Overhead is allocated to jobs at the single rate of $22 per direct labor hour. A task force headed by Harris's CFO recently designed an ABC system with four activities. The ABC system retains the current systems two direct cost categories. Thus it budgets only overhead costs for each activity. Pertinent data follow: Activity: Materials handling,Machine setup, Assembling, Shipping. Allocation base: Number of parts, Number of setups, Assembling hours, Number of shipments. Cost Allocation Rate: $0.85, $500.00, $80.00, $1,500.00

Harris systems has been awarded two new contracts, which will be produced as Job A and Job B. Budget data relating to the contracts follow: Number of parts:Job A, 15,000, Job B, 2,000. Number of setups: Job A, 6. Job B, 4. Number of assembling hours: Job A, 1,500. Job B, 200. Number of shipments: Job A, 1. Job B, 1. Total direct labor hours: Job A, 8,000. Job B, 600. Number of output units: Job A, 100. Job B, 10. Direct material cost: Job A, $220,000. Job B, $30,000. Direct labor cost: Job A, 160,000. Job B, 12,000.

Requirements: 1. Compute the product cost per unit for each job, using the original costing system (with two direct cost categories and a single overhead allocation rate). 2.Suppose Harris systems adopts the ABC system. Compute the product cost per unit for each job using ABC. 3. Which costing system more accurately assigns to jobs the cost of the resources consumed to produce them? Explain. 4. A dependable company has offered to produce both jobs for harn's for $5,400 per output unit. Harris may outsource (buy from the outside company) either job A only, job B only, or both jobs.