Skrunchy Company produces two products, Lower and Upper. The following two tables give pertinent information about these two products.

a. What is the cost per unit of Upper if Skrunchy uses traditional overhead allocation based on direct labor hours?

b. What is the cost per unit of Upper if Skrunchy uses activity-based costing to allocate overhead?

Category Direct labor Lower Upper $700,000 $1,000,000 $1,500,000 Direct material $2,000,000 Direct labor hours 28,000 25,000 Quantity produced 20,000 10,000 Total overhead $2,500,000 ABC Activity Driver Cost Lower Upper Rework Material handling Hours Moves $1,800,000 $700,000 4,000 hours 42,500 hours 40,000 moves 20,000 moves