Ramsey Company produces speakers (Model A and Model B). Both products pass through two producing departments. Model A's production is much more labor-intensive than that of Model B. Model B is also the more popular of the two speakers. The following data has been gathered for the two products:

	Product Data
	Model A	Model B
Units produced per year	10,000	100,000
Prime costs	$153,000	$1,530,000
Direct labor hours	143,000	310,000
Machine hours	21,000	196,000
Production runs	40	60
Inspection hours	900	1,300
Maintenance hours	8,000	92,000
Overhead costs:
Setup costs	$300,000
Inspection costs	209,000
Machining	318,200
Maintenance	260,000
Total	$1,087,200

	Required:
1.	Compute the overhead cost per unit for each product by using a plantwide rate based on direct labor hours. (Round to two decimal places.)
2.	Compute the overhead cost per unit for each product by using ABC. (Round rates and unit overhead cost to two decimal places.)
3.	Suppose that Ramsey decides to use departmental overhead rates. There are two departments: Department 1 (machine intensive) with a rate of $3.90 per machine hour and Department 2 (labor intensive) with a rate of $1.20 per direct labor hour. The consumption of these two drivers is as follows:

	Department 1	Department 2
	Machine Hours	Direct Labor Hours
Model A	10,000	128,000
Model B	190,000	290,000

Compute the overhead cost per unit for each product by using departmental rates. (Round to two decimal places.)

4.

CONCEPTUAL CONNECTION Using the activity-based product costs as the standard, comment on the ability of departmental rates to improve the accuracy of product costing. Did the departmental rates do better than the plantwide rate?

1. Compute the overhead cost per unit for each product by using a plantwide rate based on direct labor hours. (Round to two decimal places.)

Plantwide rate: __________ per DLH

	Model A: _________ overhead cost per unit
	Model B: ___________overhead cost per unit

2. Compute the overhead cost per unit for each product by using ABC. (Round rates and unit overhead costs to two decimal places.)

	Model A: overhead cost per unit
	Model B: overhead cost per unit

Note: Be sure to complete both tables below.

Activity	Driver	Activity Rate
Setups		per
Inspections		per
Machining		per
Maintenance		per

Overhead assignment
	Model A	Model B
Setups
Inspections
Machining
Maintenance
Total overhead
Units produced
Overhead per unit

. Suppose that Ramsey decides to use departmental overhead rates. There are two departments: Department 1: (machine intensive) with a rate of $3.90 per machine hour and Department 2: (labor intensive) with a rate of $1.20 per direct labor hour. The consumption of these two drivers is as follows:

	Department 1	Department 2
	Machine Hours	Direct Labor Hours
Model A	10,000	128,000
Model B	190,000	290,000

Compute the overhead cost per unit for each product by using departmental rates. (Round to two decimal places.)

	Model A: per unit
	Model B: per unit