Instructions Activity Rates Product Data Model A Model B Units produced per year 10,000 100,000 2. Compute the overhead cost per unit for each product by using ABC (Round rates and unit overhead costs to two decimal places) Model A: $ Prime costs Direct labor hours $146,000 $1,460,000 Model B S overhead cost per unit overhead cost per unit 137,000 320,000 Machine hours 18,000 197,000 Note: Be sure to complete both tables below Production runs 50 70 Activity Driver Activity Rate Inspection hours 800 1,200 Setups $ per Maintenance hours 9,000 91,000 Inspections $ per Overhead costs: Machining per Setup costs $348,000 Maintenance per Inspection costs 230,000 Machining 121,700 Overhead assignment Maintenance 260,000 Model A Model B Total $959,700 Setups $ S Santwide Rate Inspections Machining Compute the overhead cost per unit for each product by us lantwide rate based on direct labor hours (Round to two dec faces.) Maintenance Total overhead $ S Santwide rate: $ per DLH +Units produced Overhead per unit S $ Model A S overhead cost per unit Model B 5 overhead cost per unit Departmental Rates 3. Suppose that Ramsey decides to use departmental overhead rates. There are two departments: Department 1: (machine intensive) with a rate of $3.70 per machine hour and Department 2: (labor intensive) with a rate of $0.80 per direct labor hour The consumption of these two drivers is as follows: Department 2 Department 1 Machine Hours Direct Labor Hours Model A 8,000 Model B 170,000 126,000 250,000 Compute the overhead cost per unit for each product by using departmental rates. (Round to two decimal places.) Model A: $ Model B: $ per unit per unit Conceptual Connection + 4. CONCEPTUAL CONNECTION Using the activity-based product costs as the standard, comment on the ability of departmental rates to improve the accuracy of product costing. Did the departmental rates do better than the plantwide rate? A common justification is to use hours for machine-intensive departments and hours for labor-intensive departments. Using activity-based costs as the standard, we can say that departmental rates the accuracy of the overhead cost assignment for both products. The departmental rates cost A well the ABC method while the plantwide rate costs A well the ABC method. However, the rates of difference are very close. Looking at it this way, departments costs are not clearly more wrong than the plantwide rate; they are wrong in a direction.