Quality Furniture,Inc., produces a wood desk that sells for $500 and a wood table that sells for $900. Last year, total overhead costs of $6,000,000 were allocated based on direct labor costs. Direct labor costs totaled $2,000,000 last year, and Quality Furniture produced 15,000 desks and 5,000 tables. Total direct labor and direct materials costs by product for the last year were as follows:

			Desk		Table		Total
	Direct materials		1,575,000		950,000
	Direct labor		1,200,000		800,000		2,000,000
	Sales price		500		900
	Total OH						6,000,000
	Units produced		15,000		5,000
The management of Quality Furniture would like to use activity-based costing to allocate overhead rather than one plantwide rate based on direct labor costs. The following estimates are for the activities and related cost drivers identified as having the greatest impact on overhead costs.

Required:
1. Calculate the direct materials cost per unit and direct labor cost per unit for each product.
2.	a. Using the plantwide allocation method, calculate the predetermined overhead rate and determine the overhead cost per unit allocated to the desk and table products.
	b. Using the plantwide allocation method, calculate the product cost per unit for the desk and table products. Round results to the nearest cent.
3.	a. Using the activity-based costing allocation method, calculate the predetermined overhead rate for each activity. (Hint: Step 1 through step 3 in the activity-based costing process have already been done for you; this is step 4.)
	b. Using the activity-based costing allocation method, allocate overhead to each product. (Hint: This is step 5 in the activity-based costing process.) Determine the overhead cost per unit. Round results to the nearest cent.
	c. What is the product cost per unit for the desk and table products?
4. Calculate the per unit profit for each product using the plantwide approach and the activity-based costing approach. How much did the per unit profit change when moving from one approach to the other?

Estimated Cost Driver Activity Estimated Activity Cost Driver Overhead Costs Desk Table Total umber of purchase or umber of setups $ 800,000 1,600,000 2,400,000 1,200,000 $6,000,000 1,000 500 42,000 18,000 60,000 15,000 5,000 20,000 100 260 Purchase orders Machine setups Machine maintenance Quality inspections 900 240 chine hours umber of inspections Total