1. If Due uses traditional costingcompared to activity-based costing would the Mountain Bike be over-costed or under-costed?

2. Refer to the previous question. By what amount, if any, would the Mountain Bike per unit cost be over-costed or under-costed?

3. Refer to the previous question. By what amount, if any, would the entire Mountain Bike product line be over-costed or under-costed?

Please use the information below:

Due Co. manufactures two bicycles, the Mountain Bike and the Street Racer, and anticipates producing 8,000 Mountain Bikes and 4,000 Street Racers.

The direct material cost and direct labor cost for each bike are:

	Direct Materials	Direct Labor
Mountain Bike	$120	$240
Street Racer	$60	$160

Dues budgeted overhead cost of $2,140,000 is based on the following:

• Set-up procedures $ 400,000

• Assembling stations $1,200,000

• Finishing $ 240,000

• Shipping $ 300,000

The following activities are needed to manufacture the bikes:

	Set-up Procedures	Assembling Stations	Finishing	Shipping
Mountain Bike	6,000	12,000	8,000	4,000
Street Racer	4,000	8,000	4,000	2,000