Ontario, Inc. manufactures two products, Standard and Enhanced, and applies overhead on the basis of direct-labor hours. Anticipated overhead and direct-labor time for the upcoming accounting period are $800,000 and 25,000 hours, respectively. Information about the companys products follows.

Standard: Est. production volume, 3000 units

Direct-material cost, $25 per Unit

Direct Labor per unit, 3 hrs at $12 per hr

Enhanced: Est. production volume, 4000 units

Direct material cost, $40 per Unit

Direct Labor per unit, 4 hrs at $12 per hr

Ontarios overhead of $800,000 can be identified with three major activities: order processing ($150,000), machine processing ($560,000), and product inspection ($90,000). These activities are driven by number of orders processed, machine hours worked, and inspection hours, respectively. Data relevant to these activities follow.

Orders Processed Machine Hrs Worked Inspection Hrs

Standard 300 18000 2000

Enhanced 200 22000 8000

500 40000 10000

Top management is very concerned about declining profitability despite a healthy increase in sales volume. The decrease in income is especially puzzling because the company recently undertook a massive plant renovation during which new, highly automated machinery was installedmachinery that was expected to produce significant operating efficiencies.

2. Assuming use of activity-based costing, compute the unit manufacturing costs of the standard and enhanced products if the expected manufacturing volume is attained.

2. Activity-based overhead application rates:
		Activities Cost	Application
Activity	Cost	Driver	Rate
Order processing
Machine processing
Product inspection
Activity	Standard	Enhanced
Order processing
Machine processing
Product inspection
Total
Production volume (units)
Cost per unit
	Standard	Enhanced
Direct material
Direct labor
Order processing, etc
Total cost