Maglie Company manufactures two video game consoles: handheldand home. The handheld consoles are smaller and less expensive thanthe home consoles. The company only recently began producing thehome model. Since the introduction of the new product, profits havebeen steadily declining. Management believes that the accountingsystem is not accurately allocating costs to products, particularlybecause sales of the new product have been increasing.

Management has asked you to investigate the cost allocationproblem. You find that manufacturing overhead is currently assignedto products based on their direct labor costs. For yourinvestigation, you have data from last year. Manufacturing overheadwas $1,222,000 based on production of 340,000 handheld consoles and89,000 home consoles. Direct labor and direct materials costs wereas follows.

	Handheld			Home			Total
Direct labor	$	1,113,500		$	414,000		$	1,527,500
Materials		740,000			673,000			1,413,000

Management has determined that overhead costs are caused bythree cost drivers. These drivers and their costs for last year areas follows.

				Activity Level
Cost Driver	Costs Assigned			Handheld	Home	Total
Number of production runs	$	440,000		30	10	40
Quality tests performed		561,000		13	20	33
Shipping orders processed		221,000		120	50	170
Total overhead	$	1,222,000

Required:

a. How much overhead will be assigned to eachproduct if these three cost drivers are used to allocate overhead?What is the total cost per unit produced for each product?

b. How much overhead will be assigned to eachproduct if direct labor cost is used to allocate overhead? What isthe total cost per unit produced for each product?