Keebee, Inc. produces desktop and laptop computers. The company currently uses traditional 1. Compute the activity rate for each activity cost pool. volume-based cost system and applies manufacturing overhead cost to products on the basis of 2. Calculate the manufacturing overhead assigned to each product using the activity rates you direct labor hours. Cost information of these two products is as follows. calculated above. 3. Compute the total manufacturing cost per unit for each product. Unit Cost Information 4. The unit selling prices of desktop and laptop computers are as follows. Desktop Laptop Desktop Laptop Direct materials $100 $120 Unit selling price $500 700 Direct labor $160 $230 5. Compute the gross profit per unit and the gross profit margin (% of sales) for each product. Manufacturing overhead ? ? Production Information Desktop Laptop Units produced 5,000 10,000 Direct labor hours per unit 0.4 0.6 Total direct labor hours 2,000 6,000 Total manufacturing overhead cost is $1,800,000. The management of Keebee, Inc. is evaluating the possibility of replacing traditional volume-based cost system with an Activity Based Costing (ABC) system. Four activity cost pools and activity cost drivers have been identified by management as follows. Activity Driver Activity Cost Activity Cost Desktop Laptop Total Activity Pool Engineering and $1,000,000 5,000 5,000 10,000 designing Design hours Design hours Design hours Machine setup 100,000 20 30 50 Setups Setups Setups Assembling 160,000 2000 6,000 8,000 Direct labor Direct labor Direct labor hours hours hours Quality 540,000 2,500 5,500 8,000 inspection and Inspection hours Inspection hours Inspection hours testing