Electronics produces video games in three market categories: commercial, home, and miniature. Richardson has traditionally allocated overhead costs to the three products using the companywide allocation base of direct labor hours. The company recently implemented an ABC system when it installed computer-controlled assembly stations that rendered the traditional costing system ineffective. In implementing the ABC system, the company identified the following activity cost pools and cost drivers.

Additional data for each of the product lines follow.

Required
Round your figures to two decimal points.
a. Determine the total cost and cost per unit for each product line, assuming that overhead costs are allocated to each product line using direct labor hours as a companywide allocation base. Also determine the combined cost of all three product lines.
b. Determine the total cost and cost per unit for each product line, assuming that an ABC system is used to allocate overhead costs. Determine the combined cost of all three product lines.
c. Explain why the combined total cost computed in Requirements a and b is the same amount.
Given that the combined cost is the same using either allocation method, why is an ABC system with many different allocation rates more accurate than a traditional system with a single companywide overheadrate?

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Category Total Pooled Cost Unit Batch Product Facility Types of Costs Cost Driver Machine hours Number of production orders Time spent by research department $360,000 Indirect labor wages, supplies, factory utilities, machine maintenance 194,400 Materials handling, inventory storage, labor for setups, packaging, labeling and shipping, scheduling 105,600 esearch and development 300,000 Rent, general utilities, maintenance, facility depreciation, Square footage admin. salaries Commercial Home Miniature Total $18.00/unit $12.00/unit $15.00/unit $7.20/hour $7.20/hour $9.00/hour _ Direct materials cost Direct labor cost Number of labor hours Number of machine hours Number of production orders Research and development time Number of units Square footage 6,000 10,000 200 10% 15,000 20,000 12,000 45,000 2,000 20% 45,000 50,000 2,000 20,000 25,000 80,000 800 3,000 70% 100% 14,000 74,000 30,000 100,000