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Puget World, Incorporated, manufactures two models of television sets, the N 800 XL model and the N 500 model. Data regarding the two products follow:

	Direct Labor- Hours per Unit	Annual Production		Total Direct Labor-Hours
Model N 800 XL	3.0	7,000	units	21,000
Model N 500	1.0	12,000	units	12,000
				33,000

Additional information about the company follows:

a. Model N 800 XL requires $65 in direct materials per unit, and Model N 500 requires $25.

b. The direct labor wage rate is $23 per hour.

c. The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products.

d. Model N 800 XL is more complex to manufacture than Model N 500 and requires the use of special equipment. Consequently, the company is considering the use of activity-based costing to assign manufacturing overhead cost to products. Three activity cost pools have been identified as follows:

Activity Cost Pool	Activity Measure	Estimated Overhead Cost
Machine setups	Number of setups	$ 470,000
Special processing	Machine-hours	190,000
General factory	Direct labor-hours	1,782,000
		$ 2,442,000

Activity Measure	Expected Activity
	Model N 800 XL	Model N 500	Total
Number of setups	200	300	500
Machine-hours	20,000	0	20,000
Direct labor-hours	21,000	12,000	33,000

2. Assume that the company decides to use activity-based costing to assign manufacturing overhead cost to products.

a(1). Compute the activity rate for each activity cost pool.

a(2). Determine the amount of overhead cost that would be assigned to each model using the activity-based costing system.

b. Compute the unit product cost of each model.

Machine setup		per setup
Special processing		per MH
General factory		per DLH

	Model N 800 XL	Model N 500
Overhead cost per unit

	Model N 800 XL	Model N 500
Unit product cost