Problem 3-12A Contrasting ABC and Conventional Product Costs [LO3-2, LO3-3, LO3-4]

Precision Manufacturing Inc. (PMI) makes two types of industrial component partsthe EX300 and the TX500. It annually produces 50,000 units of EX300 and 11,500 units of TX500. The companys conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the companys two product lines is shown below:

	EX300			TX500			Total
Direct materials	$	356,325		$	152,550		$	508,875
Direct labor	$	110,000		$	37,500		$	147,500

The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to four activities as shown below:

Activity Cost Pool (and Activity Measure)	Manufacturing Overhead		Activity
			EX300		TX500		Total
Machining (machine-hours)	$	144,375		80,000		57,500		137,500
Setups (setup hours)		67,500		25		200		225
Product-level (number of products)		75,750		1		1		2
General factory (direct labor dollars)		36,875	$	110,000	$	37,500	$	147,500
Total manufacturing overhead cost	$	324,500

Required:

1-a.	Compute the plantwide overhead rate that would be used in the companys conventional cost system.(Round your answer to 2 decimal places.)

1-b.	Using the plantwide rate, compute the unit product cost for each product. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

2-a.	Compute the activity rate for each activity cost pool. (Round your Machining and General factory activity rates to 2 decimal places.)

2-b.	Using the activity rates, compute the unit product cost for each product. (Do not round intermediate calculations. Round your answers to 2 decimal places.)