Kevin Malone has been studying his department's profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company's approach to allocating overhead to products based on machine hours. The current department overhead budget of $1,220,000 is based on 40,000 machine hours.

In an initial analysis of overhead costs, Kevin has identified the following activity cost pools. Cost Pool Expected Cost Expected Activities

Product assembly $ 600,000 40,000 machine hours Machine setup

calibration 420,000 2,100 setups

Product inspection 80,000 2,000 batches

Raw materials storage 120,000 500,000 pounds

$ 1,220,000

Kevin Malone is taking the next step in his exploration of activity-based costing and wants to examine the overhead costs that would be allocated to one of the department's four products. He has gathered the following budget information about the product.

Driver Usage Product #1

Machine hours 2,000

Setups 120

Batches 40

Pounds 10,000

Please Show All Steps with explanations

6. Calculating product costs using traditional and activity-based costing Refer to the data in Questions 4 and 5. Kevin Malone found that the budget included production of 600 units of Product #1. a. Calculate the overhead cost per unit of Product #1 under traditional costing using machine hours as the overhead application base. b. Calculate the overhead cost per unit of Product #1 under activity-based costing