Fancy Foods produces gourmet gift baskets that it distributes online as well as from its small retail store. The following details about overhead costs are taken from its records.

Additional information on the drivers for its production activities follows.
Wrapping . . . . . . . . . . . . . . . . . . . . 100,000 units
Assembling . . . . . . . . . . . . . . . . . . . 20,000 direct labor hours
Product design . . . . . . . . . . . . . . . . 3,000 design hours
Obtaining business licenses . . . . . . . 20,000 direct labor hours
Cooking . . . . . . . . . . . . . . . . . . . . . 1,000 batches
Required
1. Classify each activity as unit level, batch level, product level, or facility level.
2. Compute the activity overhead rates using ABC. Form cost pools as appropriate.
3. Determine the overhead cost to assign to the following jobs using ABC.

4. What is the cost per unit for the Holiday Basket? What is the cost per unit for the Executive Basket?
5. If the company used a plantwide overhead rate based on direct labor hours, what is the overhead cost for each Holiday Basket unit? What would be the overhead cost for each Executive Basket unit if a single plantwide overhead rate is used?
6. Compare the costs per unit computed in requirements 4 and 5 for each job. Which cost assignment method provides the most accurate cost?Explain.

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Production Activity Indirect Labor $300,000 400,000 80,000 Indirect Materlals Other Overhead Wrapping Assembling Product design. Obtaining business licenses Cooking $200,000 $100,000 150,000 20,000 Holiday Basket Executive Basket Number of units .8,000 units Direct labor hours Design hours ......40 design hours 40 design hours Batches 1,000 units 500 DLH 2,000 DLH 80 batches 200 batches