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Item 3

Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the companys two product lines appear below:

	Deluxe		Standard
Direct materials per unit	$ 59.00		$ 47.00
Direct labor per unit	$ 17.00		$ 14.00
Direct labor-hours per unit	0.70	DLHs	1.40	DLHs
Estimated annual production	10,000	units	50,000	units

The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below:

Estimated total manufacturing overhead	$ 627,000
Estimated total direct labor-hours	77,000	DLHs

Required:

1. Determine the unit product costs of the Deluxe and Standard products under the companys traditional costing system.

2. The company is considering replacing its traditional costing system with an activity-based absorption costing system that would have the following three activity cost pools:

Activity Cost Pools (and Activity Measures)	Estimated Overhead Cost	Expected Activity
		Deluxe	Standard	Total
Supporting direct labor (direct labor-hours)	$ 462,000	7,000	70,000	77,000
Batch setups (setups)	105,000	200	100	300
Safety testing (tests)	60,000	30	70	100
Total manufacturing overhead cost	$ 627,000

Determine the unit product costs of the Deluxe and Standard products under the activity-based absorption costing system.