Indirect costs are allocated to the cost of a product in a manufacturing environment, or to the cost of a project or service, based on a predetermined overhead rate. Direct labor hours or another volume measurement are often used as a basis to allocate overhead in a traditional system. Activity-based costing systems allocate indirect costs based on activities associated with the cost being allocated. Refer to the illustration of Activity-Based Costing as an example to guide you in answering the questions below. Illustration of Activity-Based Costing Using the information and data below for Products X and Y, answer the following questions: Product X requires 5 hours of labor per unit and Product Y requires 10 hours. The activity bases or drivers for the indirect costs remain the same as shown on page 2 of the illustration of Activity-based Costing. Product and Cost Information: Total marketing costs $ 50,100 Total engineering costs $ 110,400 Total setup costs $ 56,000 Labor cost per hour $ 30 Potential Drivers for Indirect Costs: Activity Product X Product Y Total TV Ads 4 2 6 Engineering Cycles 18 5 23 Batched Runs 6 4 10 Total budgeted indirect costs = $fill in the blank b0f2290be049067_1 Marketing costs are allocated based on the number of . Product requires more marketing than Product . Engineering costs are allocated based on the number of . More engineering costs are allocated to Product than Product . Setup costs are allocated based on the number of . Product requires more set up costs than Product . Before going any further, it makes sense that if indirect costs are allocated using activity-based costing, more indirect costs are allocated to Product than to Product . Allocation of Indirect Costs: Once overhead costs are estimated and related activities are determined, the next step is to calculate the rates to be used to allocate costs. The formula for calculating the overhead rate is: Overhead rate = Using marketing costs as an example: $fill in the blank 73b53a028fd1f99_3 The marketing cost per TV ad is = , or $fill in the blank 73b53a028fd1f99_4 per TV ad fill in the blank 73b53a028fd1f99_5 TV ads This rate is applied to the number of activities (in this case, TV ads) associated with each product. Product X requires 4 TV ads at the planned level of production and Product Y requires 2 TV ad when the planned number of units are produced. Fill in the table showing how the indirect costs are allocated to Product X and product Y at the planned level of production. Costs allocated to: # Rate per Product X Product Y Indirect Costs: Total Activity: Activities Activity # Amount # Amount Marketing costs $ 50,100 TV ads fill in the blank 73b53a028fd1f99_6 $ fill in the blank 73b53a028fd1f99_7 4 $ 33,400 2 $ 16,700 Engineering costs 110,400 23 $ 4,800 fill in the blank 73b53a028fd1f99_9 fill in the blank 73b53a028fd1f99_10 5 24,000 Setup costs fill in the blank 73b53a028fd1f99_11 Batch Runs 10 $ 5,600 6 33,600 fill in the blank 73b53a028fd1f99_12 fill in the blank 73b53a028fd1f99_13 $ fill in the blank 73b53a028fd1f99_14 $ fill in the blank 73b53a028fd1f99_15 $ fill in the blank 73b53a028fd1f99_16 Total Product Cost: Assume the company plans to produce 500 units of Product X and 500 units of Product Y. At this level of production, what are the total indirect, direct and product costs for Product X and Y. Compute the cost per unit for the total product cost. Round the per unit cost to the nearest dollar. Product X Product Y Total Indirect Costs $fill in the blank 5779d4fcc035f9e_1 $fill in the blank 5779d4fcc035f9e_2 Total Labor Costs $fill in the blank 5779d4fcc035f9e_3 $fill in the blank 5779d4fcc035f9e_4 Total Product Cost $fill in the blank 5779d4fcc035f9e_5 $fill in the blank 5779d4fcc035f9e_6 Product Cost Per Unit $fill in the blank 5779d4fcc035f9e_7 $fill in the blank 5779d4fcc035f9e_8