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 $6,490,675 in manufacturing overhead cost and produce 23,000 units of the deluxe model and 116,000 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	$ 151	$ 110
Direct labor	$ 15	$ 11

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	$ 239,850
Processing	Machine-hours	4,292,500
Scrap or rework	Scrap or rework orders issued	647,325
Shipping	Number of shipments	1,311,000
		$ 6,490,675

Activity Measure	Expected Activity
Deluxe	Regular	Total
Purchase orders issued	390	780	1,170
Machine-hours	20,200	30,300	50,500
Scrap or rework orders issued	525	420	945
Number of shipments	5,520	8,280	13,800

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).