Product Data
		Model A		Model B
Units produced & sold per year		50,000		500,000
Sales Revenue		$1,750,000.00		$17,500,000.00
Prime cost		$125,000.00		$1,250,000.00
Direct Labor Hours		125,000		475,000
Machine hours		50,000		450,000
Set Ups		25		100
Inspection runs		200		1,800
Packing Orders		12,000		68,000
Estimated Manufacturing Overhead:
Machining costs	$150,000.00
Setup costs	$280,000.00
Inspection costs	$180,000.00
Packing costs	$260,000.00
Total Manufacturing Overhead	$870,000.00

Compute the product cost per unit and the gross profit per unit for each product by using a simple cost allocation method (plant-wide rate) based on direct labor hours. Round your final answers to two decimal places.

Compute the product cost per unit and the gross profit per unit for each product by using Activity-Based costing (ABC). Round your final answers to two decimal places.

Suppose that Ramsey decides to use departmental overhead rates.There are two departments:Department 1 (machine intensive) with an MOH rate of $0.42 per machine hour and Department 2 (labor intensive) with an MOH rate of $1.10 per direct labor hour.The actual consumption of these two drivers is as follows:

	Department 1	Department 2
	Machine Hours	Direct Labor Hours
Model A
Model B

Compute the product cost per unit and the gross profit per unit for each product by using the departmental MOH rates. Round your final answers to two decimal places.

Compare the results for the simple cost allocation system (plant-wide), departmental cost allocation and the ABC cost allocation systems. Which do you think is more accurate and why? What circumstances would favor Ramsey adopting ABC as their allocation method (provide at least three reasons)? Do you think Ramsey should adopt ABC as their allocation method? Why or why not?