Vaughn Manufacturing produces two products in its Saratoga plant, balzene and galvene. Since it opened its doors in 1965, Vaughn has been using a single manufacturing overhead pool to accumulate overhead costs. Overhead has been allocated to products based on direct labor hours. Until recently, Vaughn was the sole producer of galvene in the country and was therefore able to dictate the selling price. However, last year Marcella Products began marketing a comparable product at $59 per unit-a price that is below Vaughn's product cost. Vaughn's market share of galvene has declined rapidly as a result. The company's managers must now decide whether to meet the competitive price or discontinue the product. Vaughn's cost accountant has suggested that the company do an activity-based cost analysis before managers make the decision. The two main indirect costs of manufacturing balzene and galvene are power usage and setup costs. Most of the power usage occurs in the fabricating department; most of the setup costs are incurred in the assembly department. Setup costs are incurred predominantly in the production of balzene. The fabricating department has identified machine hours as the appropriate cost driver; the assembly department has identified setups as the appropriate cost driver. Direct labor rates are the same in both departments. The combined budget for manufacturing is as follows. The combined budget for manufacturing is as follows. Total Balzene Galvene 5,000 40 hours per unit $2 per unit 5,000 20 hours per unit $9.00 per unit $1,080,000 Number of units Direct labor Direct material Overhead Indirect labor Fringe benefits Indirect materials Power $50,000 18,000 31,000 180,000 90,000 25,000 20,000 30,000 Setup Quality assurance Other utilities Depreciation The cost accountant has prepared the following estimates of overhead usage by the two departments: Assembly 25% Indirect labor Fringe benefits Indirect materials Power Fabricating 75% 70% $20,000 $100,650 $20,000 65% 30% $11,000 $79,350 $70,000 35% Setup Quality assurance Other utilities Depreciation 60% 40% 80% 20% Activity Base Usage Balzene Machine Hours 4 MH/unit 6 MH/unit Setups 1,000 250 Galvene (a) Your answer is incorrect. Calculate the unit costs of balzene and galvene using the current overhead allocation basis of direct labor hours. (Round overhead rate and final answers to 2 decimal places, e.g. 15.25.) Balzene Galvene Cost per unit