Question 2

ABC International LTD produces two types of industrial compressors: standard and upgraded.

The company provided the following information:

	Standard	Upgraded
Sales units	5,000	3,000
Sales price per unit	$600	$1000
Direct materials cost per unit	$400	$600
Direct labor cost per unit	$70	$100
Number of machines hours per unit	3	4
Sales and marketing as percentage of total revenue	1%	1.5%
Administration as percentage of total cost of labor	20%	20%

The company groups its overhead activities under three categories as follows:

Activity	Total costs
Total machining costs	$270,000
Sales and marketing	$75,000
Administration	$130,000

Required:

Calculate the cost of a standard and an upgraded compressor (per unit) under the activity-based costing system.