KJ Company has analyzed its production processes and has determined that the following five activities with the appropriate cost drivers are the main causes of overhead: machine hours (# of machine hours), machine setups (# of setups), quality control (# of inspections), purchase orders (# of purchase orders), and receiving material (# of receiving reports). The company is interested in implementing an activity-based costing system to better allocate overhead. KJ has been using direct labor hours to apply overhead to production.

KJ makes three products: X, Y, Z. KJ's production in units, direct material costs, direct labor costs, and overhead cost are as follows:

a. Compute the predetermined overhead rate using the traditional overhead allocation.

b. Calculate the cost to produce one unit of each product using traditional overhead allocation.

c. Assume that KJ has made the change to ABC, compute the overhead rate per activity.

d. Using the rates calculated in Part c, determine the amount of overhead assigned to each unit of product.

e. Using the information from Part d, compute the cost to manufacture one unit of each product.

f. If product X sells for $165, product Y sells for $210, and product Z sells for $140, what is the order of profitability for the products under the traditional costing system? Under ABC system?

Units produced Direct labor hours per unit Direct material per unit Direct labor per unit X30,0002$100$50Y20,0002.5$150$30Y10,0003$75$40