Management has determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year are as follows.

				Activity Level
Cost Driver	Costs Assigned			Handheld	Home	Total
Number of production runs	$	605,000		45	10	55
Quality tests performed		620,000		12	19	31
Shipping orders processed		180,000		90	60	150
Total overhead	$	1,405,000

Required:

a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product?

b. How much overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product?

The answer table is below. Please include your answer there.

a.

Chairs Profit Margin ________ (%)

Desks Profit Margin ________ (%)

Which of the two products should be dropped? Chairs or desks?

b. Esimated margin for desks year 2 - (%)

Desks