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Activity Based Costing 2annon Corporation manufactures a Blu-ray Player available in two models: the 2100, and the 2200. Despite the growing popularity of the 2200 model, company prots have been declining steadily, and management is beginning to think there might be a problem with their costing system. Material and labor costs per unit are presented in the chart below: Direct Materials -a Direct Labor _-!I The company's estimated total overhead is $600,000 for the coming period. It applies manufacturing overhead on the basis of direct labor hours. The 2200 is the more complex product, requiring 4 hours of direct labor to manufacture, while the 2100 is less complex requiring only 3 hours of direct labor. 30,000 units of 2100 and 15,000 units of 2200 will be produced and sold. Management is considering a shift to activity-based costing. The following information is available relating to the company's activity pool. EStimatEd Expected Activity Overhead Ace-area coareeereeaerrra Measure m- Parts Management (No. of parts) $150, 000 - Product Testing {No. of tests run) $90,000 hours) $360 000 5, 000 Question 1: Assume that the company continues to use direct labor hours as a basis for applying overhead costs. a. Compute the predetermined overhead rate. b. Compute the unit product cost. Question 2: Assume that the company shifts to activitybased costing. a. Compute the activity rate for each of the activity cost pools and determine the amount of overhead cost that would be applied to each model using activity based costing. b. Compute the unit product cost of each model

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