Watt Master Industries manufactures two types of electrical power units, custom and standard, which involve four overhead activities€”production setup, procurement, quality control, and materials management. An activity analysis of the overhead revealed the following estimated costs and activity bases for these activities:

The activity-base usage quantities for each product are as follows:

a. Determine an activity rate for each activity.
b. Assign activity costs to each product, and determine the unit activity cost using the activity rates from (a).
c. Assume that each product required one direct labor hour per unit. Determine the per unit cost if factory overhead is allocated on the basis of direct labor hours.
d. Explain why the answers in (b) and (c) aredifferent.

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Activity Cost Activity Base Production setup Procurement Quality control Materials management 0,000 $38,400 126,000 150,000 Number of setups Number of purchase orders Number of inspections Number of components Total $434,400 Purchase Orders Inspections Components Unit Volume 300 100 400 Setups Custom Standard Total 400 80 480 1,000 200 1,200 2,000 500 2,500 4,000 4,000 8,000