Part 1: Klein Company produces three types of bird feeders: Basic, Squirrel-Proof, and Deluxe.

Currently, the company allocates overhead to products using machine hours. This year, the company produced the following:

• 1000 Basic models
• 2000 Squirrel-Proof models
• 1800 Deluxe models

Details for each product at the end of the current year are as follows:

	Basic	Squirrel-Proof	Deluxe
Revenue	$30,000	$110,000	$117,000
Direct Materials	$12,000	$50,000	$54,000
Direct Labour	$7,500	$19,000	$22,500
Machine-hours per unit	0.3 MH	0.5 MH	0.4 MH

The total overhead cost to be allocated to products is $28,000.

Calculate the profit per unit for each product after allocated overhead costs using machine hours.

Part 2: Use the activity-based information below to calculate the cost of each unit of product using machine setups instead of machine hours.

Cost Driver	Cost	Basic	Squirrel-Proof	Deluxe
Number of Machine Setups	$12,000	3 Setups	4 Setups	5 Setups
Operating Machines	$4,000	.3 MH	.5 MH	.4 MH
Number of Sales Orders Received	$4,000	20 Orders	40 Orders	45 Orders
Number of Units Shipped	$8,000	1,000 Units	2,000 Units	1,800 Units

Write a paper, no more than one page in length, that discusses the following:

• What are your observations when you compare the results for each method?
• Which do you think is more accurate and why?
• Based on your results, would you recommend the firm change the level of production for any category and why?