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Following a review of its operational processes, Hedman Company has identified the following overhead activities costs and activity drivers for the upcoming year:

Activity	Expected cost	Activity Driver	Estimated Activity Level
Setting up	$140,000	Number of setups	700 setups
Inspecting	$100,000	Inspection hours	10,000 hours
Polishing	$190,000	Machine hours	38,000 hours
Receiving	?	Number of parts	100,000 parts

The company produces several different couplings that it sells throughout North America. The following is information on two separate batches of the companys couplings:

	Sleeve Couplings	Disc Couplings
Direct Materials	$1,900	$2,000
Direct Labour	$1,200	$1,200
Units Completed	200	100
Number of setups	2	2
Inspection hours	8	4
Machine hours	40	60
Parts used	40	80

The company's normal activity is 20,000 direct labour hours. Each batch uses 100 hours of direct labour.

Upon investigation, you discover that Receiving employs a worker, who spends 75% of her time on the receiving activity and 25% of her time on inspecting products. Her annual salary is $80,000. In addition, Receiving also uses a forklift, at a cost of $12,000 per year for fuel and maintenance. The forklift is used only in receiving.

Required: a. Compute the unit cost for Sleeve Couplings, using direct labour hours to assign overhead.

b. Compute the unit cost for Sleeve Couplings, using activity rates.

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