Precision Ltd. (PL) is a private company that manufactures circular saw blades. Caroline Reynolds, the president, is concerned that PL has been losing its market share, and its operating results are deteriorating. You, CPA, have been contracted to help PL resolve the production and sales issues it is currently experiencing. In the initial phase of the engagement, you begin by reviewing budgeted costs and the cost allocations used by PL. In your review of direct manufacturing costs, you note that PL has recently upgraded to computer-aided manufacturing equipment that has virtually eliminated waste and spoiled units. As a result, direct labour costs have been cut by 20% per year over the last five years. Caroline doesn't think it is possible to reduce costs any further. Caroline provided you with the standard cost report (Appendix I) that was drafted when planning for the current year's budget. This report explains how PL currently allocates overhead costs.

Task #1 PL currently allocates non-direct costs to product lines based on a variety of drivers (Appendix I). Caroline would like you to evaluate the current allocations and advise whether or not they are appropriate. Using your recommendations, provide the updated full cost per unit for each product line.