Siegel Company manufactures a product available in a deluxe model and a regular model. The company has manufactured the regular model for years. The deluxe model was introduced several years ago to tap a new segment of the market. Since introduction of the deluxe model, the companys profits have steadily declined and management has become increasingly concerned about the accuracy of its costing system. Sales of the deluxe model have been increasing rapidly.

Manufacturing overhead is assigned to products on the basis of direct labor-hours. For the current year, the company estimated it will incur $5,838,900 in manufacturing overhead cost and produce 14,000 units of the deluxe model and 111,000 units of the regular model. The deluxe model requires 1.0 direct labor-hours per unit, and the regular model requires 0.5 direct labor-hour. Material and labor costs per unit are as follows:

	Model
Deluxe	Regular
Direct materials	$ 158	$ 119
Direct labor	$ 18	$ 7

Required:

1-a. Using direct labor-hours as the base for assigning manufacturing overhead cost to products, compute the predetermined overhead rate.

1-b. Determine the unit product cost of each model.

2. Management is considering using activity-based absorption costing to apply manufacturing overhead cost to products. The activity-based system would have four activity cost pools:

Activity Cost Pool	Activity Measure	Estimated Overhead Cost
Purchasing	Purchase orders issued	$ 323,400
Processing	Machine-hours	3,562,500
Scrap or rework	Scrap or rework orders issued	661,500
Shipping	Number of shipments	1,291,500
		$ 5,838,900

Activity Measure	Expected Activity
Deluxe	Regular	Total
Purchase orders issued	440	880	1,320
Machine-hours	19,000	28,500	47,500
Scrap or rework orders issued	525	420	945
Number of shipments	4,920	7,380	12,300

Calculate an activity rate for each of the four activity cost pools.

3. Using the activity rates from part (2):

a. Compute the total manufacturing overhead cost applied to each model. Also, calculate each models manufacturing overhead cost per unit.

b. Compute each models unit product cost (including direct materials, direct labor, and manufacturing overhead).