Section one: 35 marks.

RAK Furniture has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, Chairs and Desks, about which it has provided the following data:

	Chairs	Desks
Direct materials per unit	$36.20	$58.46
Direct labor per unit	$18.25	$42.37
Direct labor-hours per unit	0.5	169.67
Annual production	1018000	509000

The company's estimated total manufacturing overhead for the year is $2,500,000 and the company's estimated total direct labor-hours for the year is (23509). The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:

Activities and Activity Measures	Estimates Overhead Cost
Assembling products (DLHs)	$750,000
Preparing batches (batches)	423509
Cutting pieces (MHs)	850,000
Total	?

	Chairs	Desks	Total
Assembling products	40,000	10,000	50,000
Preparing batches	2,500	1,500	4,000
Cutting pieces	1,500	500	2,000

Required:

a. Determine the manufacturing overhead cost per unit of each of the company's two products under the traditional costing system (15 marks).

b. Determine the manufacturing overhead cost per unit of each of the company's two products under an activity-based costing system (20 marks)