Maxtar Industries manufactures high-quality smoker/barbecue units. The company has two product linesPremium and Standard. The company has traditionally applied manufacturing overhead costs to these products using a plantwide predetermined overhead rate based on direct labor-hours.

Other data:

Estimated total manufacturing overhead	$1,520,000
Estimated total direct labor-hours	400,000 DLHs

	Premium	Standard
Direct materials per unit	40	30
Direct labor cost per unit	24	18
Direct labor-hours per unit	2 DLHs	1.5 DLHs
Unit produced	50,000 units	200,000 units

Maxtar Industries has recently experimented with an activity-based costing approach to determining its unit product costs for external reporting purposes. Details are:

Activity and activity measures	Estimated overhead costs	Expected Activity
		Premium	Standard	Total
Supporting direct labor (Direct labor hours)	$800,000	100,000	300,000	400,000
Setting up machines (set up)	480,000	600	200	800
Part administration (part type)	240,000	140	60	200
Totals	$1,520,000

Requirements: [8]

a. Compute the unit product cost for premium and standard products under the companys traditional costing system.

b. Compute the unit product cost for premium and standard products under the activity-based costing system.

c.Explain why the traditional and activity-based cost overhead assignments differ.