The Big Bus Company manufactures two products, Product 1 and Product 2. Product 2 was developed as an attempt to enter a market closely related to that of Product 1. Product 2 is the more complex of the two products, requiring three hours of direct labour time per unit to manufacture compared to one and one-half hours of direct labour time for Product 1. Product 2 is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct labour-hours. The company estimated it would incur a total of $396,000 in manufacturing overhead costs and produce 5,500 units of Product 2 and 22,000 units of Product 1 during the current year. Unit costs for materials and direct labour are:
a. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year. (5 marks)
b. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: (5 marks)
						Expected Activity
		Activity Costs Pools		Estimated Overhead Costs		Product 1	Product 2	Total
		Machine set-ups required		170 000 US$		700	1 000	1 700
		Purchase orders issued		37 000		300	200	500
		Machine-hours required		91 000		4 000	9 000	13 000
		Maintenance requests issued		98 000		400	600	1 000
				396 000 US$
Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year.