Montreal Pharmaceutical company produces two types of drugs: Drug A and B. The company uses traditional costing and applies manufacturing overhead on the basis of machine hours. Direct product costs per unit are as follows.

Per unit	Drug A	Drug B
DM	80$	50$
DL	100$	70$

For producing 1,000 units of Drug A and 1,500 units of Drug B the following manufacturing overhead incur;

• Machine set up; 7000$
• Machinery; 225,000$
• Inspection; 120,000$
• Material handling; 10,000$

The company sells its products for the following price

• A; 500$ per unit
• B; 240$ per unit

The company has recently heard about activity-based costing and seeks to understand how product cost would change under this costing approach. The management accountant conducted an activity analysis and prepared the following info.

Activity Cost Pool	Cost Driver	Proportion Used by Drug A	Proportion Used by Drug B
Machine Set Up	Number of Setups	20%	80%
machinery	Machine hours	60%	40%
Inspection	Number of Inspections	10%	90%
material handling	Raw- material costs	40%	60%

INSTRUCTOIONS

1. Calculate the Unit product cost for Drugs A & B under activity-based costing. Show you calculations
2. Given the calculated product cost and selling info, what is the profit per unit of Drug A and B. Show your calculations