Menlo Company produces two bracelets, Ladies Bracelets (LB) and Men's Bracelets (MB), that sells for $123 and $108 respectively.In 2018 the company produced 15,000 LB and 10,000 MB.Manufacturing overhead costs for 2018 was $900,000. Below are the direct costs for each bracelet: Menlo would like to use Activity Based Costing to allocate its manufacturing overhead costs.

The company's tax rate is 21%.

Direct Manufacturing costs per bracelet LBMB

Direct materials$40$30

Direct labor$13$12

The following information is for Activity Based Costing (ABC):

ManufacturingQuantity of Activity Use of Activity.

Activity (Cost Driver)Overhead Costs(Cost Driver) LB MB

Machine setups $240,0001,500 setups5001,000 setups

Assembly350,00050,000 machine hours30,00020,000 machine hrs.

Inspecting 100,000400 inspections100300 inspections

Packaging products 60,00025,000 units produced15,00010,000 units produced

General factory administration 150,00030,000 labor hours18,00012,000 labor hours

$900,000

During 2018 the company sold 14,200 LB and 9,500 MB.

Selected account balances for 2018:

Research and Development expense$120,000

Wages payable 8,000

Depreciation of Office equipment 30,000

Unearned Rent Revenue4,000

Selling Expense 110,000

Prepaid advertising 6,000

Administrative Expense 115,000

Short-term investments 5,000

Restructuring costs20,000

Interest expense 2,300

Investment Revenue 1,500

Dividend paid 3,000

Accumulated depreciation, factory equipment 60,000

Retained earnings 125,000

Unrealized loss on trading investment 2,500

Required:

a.Calculate the activity rate for each cost driver (round to two decimal points if needed)

b.Calculate the unit cost of each watch under ABC costing (round to two decimal points if needed).

c.Prepare Menlo multiple-step Income statement for the year ended December 31, 2018.

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