Padmanabhan, Inc. manufactures two products in its production facility. Estimated production details for each product for the coming year are as follows:

Product X1	Product GB 12
X1 - Estimated production 1,200 units	GB 12- Estimated production 800 units
X1 - Unit raw materials cost -$300.00 per unit	GB 12 -Unit raw materials cost -$200.00 per unit
X1 - Unit direct labor - 4 hours per unit at $12 per hour	GB 12 -Unit direct labor - 4 hours per unit at $12 per hour
X1- 1 machine hour for each unit of X1	GB -12 - 4 machine hours for each unit of GB 12

Estimated total overhead is $308,000 per year. Overhead costs are machinery depreciation and the costs of the maintenance department that is primarily engaged in calibrating, adjusting, repairing, and maintaining the highly automated production machinery.

Product X1 and Product GB12 are about the same size and weight and require the same amount of direct labor so Padmanabhan currently allocates overhead on a per unit of production basis. That is, the estimated overhead costs are divided by the total number of products produced to get the overhead allocated to each one. Currently, product GB12 has a lower reported unit cost than product X1, is priced less, and is marketed as an economy product. Competitors seem to be unable to match the selling price of Product GB12, but Product X1 is competing with several comparable products that are priced lower. Padmanabhan is therefore planning to expand its marketing and production efforts for Product GB12.

Calculate the total unit cost of each product as Padmanabhan is currently doing it. For example, the current cost for raw materials per unit is $300 for Product X1. (Type inside the table cells)

	Product X1 Costs (each)	Product GB12 costs (each)
Raw Material	$300
Direct Labor
Overhead
Total Unit Cost

a. Show how you computed unit overhead costs under the current process.

b. Comment on Padmanabhans current process for allocating overhead.

c. Based on the description of the manufacturing process, would you recommend any changes to the way Padmanabhan currently allocates overhead? Why? If so, recompute unit cost and be sure to show the computations and allocation process you would recommend for manufacturing overhead.

	Product X1 Costs (each)	Product GB12 costs (each)
Raw Material	$300
Direct Labor
Overhead
Total Unit Cost

d. Show how you are computing overhead below.

e. Does your computation and analysis explain the competitive pressures Padmanabhan has been facing? How?