Traditional Product Costing versus Activity$-$Based Costing

Ridgeland Inc. makes backpacks for large sporting goods chains that are sold under the customers' store brand names. The Accounting Department has identified the following overhead costs and cost drivers for next year:

Overhead Item$/$Expected Costs

Setup costs$-$$$175,000$

Ordering costs$-120,000$

Assembly $-910,000$

Finishing $-208,000$

Cost Driver$/$Maximum Quality

Number of setups $-1,750$

Number of orders $-15,000$

Number of machine hours $-14,000$

Number of direct labor hours $-104,000$

The following data are for two recently completed jobs:

Job $201/$Job $202$

Cost of direct materials $-$ $$12,000/$$$14,000$

Cost of direct labor $-$ $$20,500/$$$40,000$

Number of units completed $-1,000/850$

Number of setups $15/18$

Number of orders $200/100$

Number of machine hours $200/225$

Number of direct labor hours $-820/1,600$

Required

a$.$ Determine the unit cost for Job $201$ and Job $202$ using a traditional plantwide overhead rate based on machine hours. Hint: The cost per unit for Job $201$ is $$52\mathrm{.}69.$ Please show how this answer is calculated.

b$.$ Determine the unit cost for Job $201$ and Job $202$ using ABC. $($Round answers to two decimal places.$)$ Hint: The cost per unit for Job $202$ is $$87\mathrm{.}56.$ Please show how this answer is calculated.

c$.$ As the manager of Ridgeland, is there additional information that you would want to help you evaluate the pricing and profitability of Jobs $201$ and $202?$

d$.$ Assuming the company has been using the method required in part a$,$ how should management react to the findings in part b$?$