Fisico Company produces exercise bikes. One of its plants produces two versions: a standard model and a deluxe model. The deluxe model has a wider and sturdier base and a variety of electronic gadgets to help the exerciser monitor heartbeat, calories burned, distance traveled, etc. At the beginning of the year, the following data were prepared for this plant:

Additionally, the following overhead activity costs are reported:
Maintenance ......... $ 600,000
Engineering support ...... 900,000
Materials handling ...... 1,200,000
Setups ............. 750,000
Purchasing ......... 450,000
Receiving ......... 300,000
Paying suppliers ........ 300,000
$4,500,000
Required:
1. Calculate the cost per unit for each product using direct labor hours to assign all overhead costs.
2. Calculate activity rates and determine the overhead cost per unit. Compare these costs with those calculated using the unit-based method. Which cost is the most accurate? Explain.

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Standard Model Deluxe Model 30,000 $370 Expected quantity Selling price Prime costs Machine hours Direct labor hours Engineering support (hours) Receiving (orders processed) Materials handling (number of moves) Purchasing (number of requisitions) Maintenance (hours used) Paying suppliers (invoices processed) Setting up batches (number of setups) 15,000 $700 $4.5 million S5.25 million 37,500 75,000 13,500 3,000 15,000 750 6,000 3,750 60 37,500 75,000 31,500 4,500 45,000 1,500 24,000 3,750 540