Puget World, Incorporated, manufactures two models of television sets, the N 800 XL model and the N 500 model. Data regarding the two products follow:

	Direct Labor- Hours per Unit	Annual Production		Total Direct Labor-Hours
Model N 800 XL	4.0	5,000	units	20,000
Model N 500	1.5	10,000	units	15,000
				35,000

Additional information about the company follows:

a. Model N 800 XL requires $65 in direct materials per unit, and Model N 500 requires $20.

b. The direct labor wage rate is $20 per hour.

c. The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products.

d. Model N 800 XL is more complex to manufacture than Model N 500 and requires the use of special equipment. Consequently, the company is considering the use of activity-based costing to assign manufacturing overhead cost to products. Three activity cost pools have been identified as follows:

Activity Cost Pool	Activity Measure	Estimated Overhead Cost
Machine setups	Number of setups	$ 430,000
Special processing	Machine-hours	200,000
General factory	Direct labor-hours	1,645,000
		$ 2,275,000

Activity Measure	Expected Activity
	Model N 800 XL	Model N 500	Total
Number of setups	140	260	400
Machine-hours	16,000	0	16,000
Direct labor-hours	20,000	15,000	35,000

Required:

1. Assume that the company continues to use direct labor-hours as the base for applying overhead cost to products.

a. Compute the predetermined overhead rate.

b. Compute the unit product cost of each model.