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Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is expected to sell 35,000 units next year and Product L
Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is expected to sell 35,000 units next year and Product L is expected to sell 7,000 units. A unit of either product requires 0.7 direct labor-hours. The company's total manufacturing overhead for the year is expected to be $2,499,000. Required: 1-a. The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If this method is followed, how much overhead cost per unit would be applied to each product? 1-b. Compute the total amount of overhead cost that would be applied to each product. 2. Management is considering an activity-based costing system and would like to know what impact this change might cost. The total manufacturing overhead would be divided in half between the two products, with $1,249,500 assigned to Product H and $1,249,500 assigned to Product L. If this suggestion is followed, how much overhead cost per unit would be assigned to each product
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