Jacobson Pharmaceuticals manufactures an over-the-counter allergy medication called Breathe. Jacobson is trying to win market share from Sudafed and Tylenol. Jacobson has developed several different Breathe products tailored to specific markets. For example, the company sells 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. Jacobson's controller, Sandra Dean, has just returned from a conference on ABC. She asks Keith Yeung, supervisor of the Breathe product line, to help her develop an ABC system. Dean and Yeung identify the following activities, related costs, and cost allocation bases:

The commercial-container Breathe product line had a total weight of 8,300 kilos, used 900 machine hours, and required 240 samples. The travel-pack line had a total weight of 6,500 kilos, used 300 machine hours, and required 340 samples. Jacobson produced 2,800 commercial containers of Breathe and 20,000 travel packs.
Requirements
1. Compute the cost allocation rate for each activity.
2. Use the activity-based cost allocation rates to compute the indirect cost of each unit of the commercial containers and the travel packs.
3. The company's original single-allocation-based cost system allocated indirect costs to products at $400 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.
4. Compare the activity-based costs per unit to the costs from the original system. How have the unit costs changed? Explain why the costs changed as they did.

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Estimated Indirect Estimated Quantity Allocation B Activity Activity Costs Allocation Base of $160,000 430,000 113,000 $703,000 Kilos Machine hours Samples 16,000 kilos 2,300 hours 2,000 samples Quality assurance Total indirect costs