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MOD Pharmaceutical Company produces three drugs?Diomycin, Homycin, and Addolin?belonging to the analgesic (pain-killer) family of medication. Since its inception four years ago, MODhas used a direct labor hour-based system to assign manufacturing overhead costs to products.

Eme Weissman, the president of MODPharmaceutical, has just read about activity-based costing in a trade journal. With some curiosity and interest, she asked her financial controller, Takedo Simon, to examine differences in product costs between the firm's current costing and activity-based costing systems.

MOD has the following budget information for the year: