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McNeil Pharmaceuticals manufacturers an over-the-counter allergy medication. The company sells both large commercial containers of 1,000 capsules to health care facilities and travel packs of 20 capsules to shops in airports, train stations, and hotels. The following information has been developed to determine if an activity-based costing system would be beneficial: (Click the icon to view the information.) Read the requirements Requirement 1. McNeil's original single plantwide overhead allocation rate costing system allocated indirect costs to products at $81.50 per machine hour. Compute the total indirect costs allocated to the commercial containers and to the travel packs under the original system. Then compute the indirect cost per unit for each product. Round to two decimal places. Select the formula, and then enter the amounts to compute the indirect cost per unit for each product. (Abbreviation used: mfg. = manufacturing. Round dollar amounts to two decimal places.) = Indirect cost per unit I X Data Table Requirements Estimated Indirect Costs Allocation Base Estimated Quantity of Allocation Base Activity Materials handling Packaging $ 95,000 Number of kilos 19,000 kilos 200,000 Number of machine hours 5,000 hours 1. McNeil's original single plantwide overhead allocation rate costing system allocated indirect costs to products at $81.50 per machine hour. Compute the total indirect costs allocated to the commercial containers and to the travel packs under the original system. Then compute the indirect cost per unit for each product. Round to two decimal places. 2. Compute the predetermined overhead allocation rate for each activity 3. Use the predetermined overhead allocation rates to compute the activity-based costs per unit of the commercial containers and the travel packs. Round to two decimal places. (Hint: First compute the total activity-based costs allocated to each product line, and then compute the cost per unit.) 4. Compare the indirect activity-based costs per unit to the indirect costs per unit from the traditional system. How have the unit costs changed? Explain why the costs changed. Quality assurance 1,875 samples 112,500 Number of samples 407,500 Total indirect costs Actual production information includes the following: Commercial Containers Travel Packs 3,800 containers 50,000 packs Units produced Weight in kilos Machine hours 15,200 2,660 15,000 500 Print Done Number of samples 380 750

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