Question

Snowden Industries produces two electronic decoders, P and T. Decoder P is more sophisticated and requires more programming and testing than does Decoder T. Because of these product differences, the company wants to use activity-based costing to allocate overhead costs. It has identified four activity pools. Relevant information follows:

Activity Pools	Cost Pool Total	Cost Driver
Repair and maintenance on assembly machine	$105,600	Number of units produced
Programming cost	143,400	Number of programming hours
Software inspections	11,000	Number of inspections
Product testing	15,000	Number of tests
Total overhead cost	$275,000

Expected activity for each product follows:

	Number of Units	Number of Programming Hours	Number of Inspections	Number of Tests
Decoder P	19,800	2,000	190	1,400
Decoder T	46,200	1,000	60	1,100
Total	66,000	3,000	250	2,500

Assume that before shifting to activity-based costing, Snowden Industries allocated all overhead costs based on direct labor hours. Direct labor data pertaining to the two decoders follows:

	Direct Labor Hours
Decoder P	6,600
Decoder T	15,400
Total	22,000

Required

a) Compute the amount of overhead cost allocated to each type of decoder when using direct labor hours as the allocation base.

b) Determine the cost per unit for overhead when using direct labor hours as the allocation base and when using ABC.

(Round intermediate calculations and final answers to 2 decimal places.)​

Answer 1