Volume-Based Costing versus ABC Carter Company manufactures two products, Deluxe and Regular, and uses a traditional two-stage cost allocation system. The first stage assigns all factory overhead costs to two production departments, A and B, based on machine hours. The second stage uses direct labor hours to allocate overhead to individual products. For the current year, the firm budgeted $1,000,000 total factory overhead cost. The $1,000,000 was for the planned levels of machine and direct labor hours shown in the following table: Machine hours Direct labor hours Production Department A 4.000 20,000 Production Department B 16.000 10,000 The following information relates to the firm's operations for the month of January: Units produced and sold Unit cost of direct materials Hourly direct labor wage rate Direct labor hours in Department A per unit Direct labor hours in Department B per unit Deluxe 200 $100 $25 2 1 Regular 800 $50 $20 1 Carter Company is considering implementing an activity-based costing system. Its management accountant has collected the following information for activity cost analysis for the current year: Budgeted Overhead Cost Driver Driver Consumption Budgeted Quantity Deluxe Activity Materials movement $ Machine setups Inspections Shipment 7,000 Number of production runs 400.000 Number of setups 588.000 Number of units 5,000 Number of shipments $1.000,000 350 500 19.600 250 15 25 200 50 Regular 20 50 800 100

Required

Calculate the unit cost for each of the two products under the existing volume-based costing system.

Calculate the overhead per unit of the cost driver under the proposed ABC system.

Calculate the unit cost for each of the two products if the proposed ABC system is adopted.