The Track corporation makes mountain bikes. They make several different models. Under the old cost system Track allocated overhead based on number of units produced. Overall, Track produces 150,000 bicycles each year. Track decided to switch to Activity Based Costing as it was consistently selling its basic model for 800, which is less than any competitor was offering a similar model. The following data relates to the basic model:

Basic Model:

Annual Production 40,000 units Direct Materials $400 per unit Direct Labor $100 per unit

Firm-wide Manufacturing Overhead Cost Pools:

Cost Pool	Cost	Cost Driver
Material Ordering	$400,000	Number of purchase orders
Machine Setup	$6,000,000	Number of setups
Machine Processing	$14,000,000	Machine hours
Rent & other fixed costs	$5,000,000	Direct labor costs
Total overhead	$25,400,000

Annual Activity

Cost Pool	All Products	Basic model
Material Ordering	40,000 purchase orders	8,000
Machine Setup	6,000 setups	1,000
Machine Processing	50,000Mhr	15,000Mhr
Rent & other fixed costs	$5,000,000 DL cost (firm-wide cost)	?

Required:

1. Calculate the unit cost per basic model under the old cost system.

2. Calculate the unit cost per basic model under the new ABC costing system. Should Track sell their basic model for $800?