Unit-Based Versus Activity-Based Costing

Fisico Company produces exercise bikes. One of its plants produces two versions: a standard model and a deluxe model. The deluxe model has a wider and sturdier base and a variety of electronic gadgets to help the exerciser monitor heartbeat, calories burned, distance traveled, etc. At the beginning of the year, the following data were prepared for this plant:

Standard Model Deluxe Model Expected quantity 30,000 15,000 Selling price $370 $700 Prime costs $4.5 million $5.25 million Machine hours 37,500 37,500 Direct labor hours 75,000 75,000 Engineering support (hours) 13,500 31,500 Receiving (orders processed) 3,000 4,500 Materials handling (number of moves) 15,000 45,000 Purchasing (number of requisitions) 750 1,500 Maintenance (hours used) 6,000 24,000 Paying suppliers (invoices processed) 3,750 3,750 Setting up batches (number of setups) 60 540 Additionally, the following overhead activity costs are reported:

Maintenance $600,000 Engineering support 900,000 Materials handling 1,200,000 Setups 750,000 Purchasing 450,000 Receiving 300,000 Paying suppliers 300,000 $4,500,000 Required:

1. Calculate the cost per unit for each product using direct labor hours to assign all overhead costs.

Unit cost Standard $ Deluxe $

2. Calculate activity rates.

Activity Rates Maintenance $ per hour used Engineering support $ per hour Materials handling $ per move Setups $ per setup Purchasing $ per requisition Receiving $ per order Paying suppliers $ per invoice Determine the cost per unit. If required, round your final answers to the nearest cent.

Overhead cost Standard $ per unit Deluxe $ per unit