Big Sound Inc. manufactures two products: receivers and loudspeakers. The factory overhead incurred is as follows:
Indirect labor .............$ 400,400
Subassembly Department ........ 198,800
Final Assembly Department ....... 114,800
Total ................ $714,000
The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows:

The activity- base usage quantities and units produced for the two products are shown below.

Instructions
1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is $ 420,000 and $ 294,000 for the Subassembly and Final Assembly departments, respectively.
2. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1).
3. Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments.
4. Determine the total and per- unit cost assigned to each product under activity-based costing.
5. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costingmethods.

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Activity Setup Quality control Budgeted Activity Cost $138,600 261,200 400,400 Activity Base Number of setups Number of inspections Total DirectLabor Direct Labor Number of Number of Units Setups Inspections Subassembly Final Assembly Produced Receivers Loudspeakers 80 320 400 450 1,750 2,200 875 525 1,400 525 875 1400 7,000 7,000 14,000 Total