The company has two products, 2009L and 2010V, about which it has provided the following data:

2009L 2010V

Direct materials per unit $10.20 $50.50

Direct labour per unit $8.40 $25.20

Direct labour hours per unit 0.40 1.20

Annual production 30,000 10,000

The company's estimated total manufacturing overhead for the year is $1,464,480 and the company's estimated total direct labour-hours for the year is 24,000.

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 Estimated Overhead Cost

Supporting direct labour (DLHs) $552,000

Setting up machines (setups) 132,480

Parts administration (part types) 780,000

Total $1,464,480

Activities 2009L 2010V Total

Supporting direct labour 12,000 12,000 24,000

Setting up machines 864 240 1,104

Part administration 600 960 1,560

How to calculate the following:

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

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

c. Compare the results in part A and B under both costing systems and specify the differences in both systems.

d. What is the significance of the Activity Costing System that Jackson might be referring to?

e. How is ABC system different from traditional costing system?

f. The use of which activity level, budgeted (same as expected) or maximum capacity, is consistent with ABC? Explain.

g. How might the use of ABC based on maximum capacity activity level enhance a firm's ability to compete on price? Explain.

h. If you were to recommend one of the costing systems for the company., which one would you pick and why?