AnoDigi Inc. (ADI) uses a traditional approach to overhead allocation. The company produces two different models of weight scales for use in homes: Analog (an analog scale) and Digital (a digital weight scale with readout). Prices for the two products are based on full costs of production (i.e., inclusive of allocated manufacturing overhead). In 20X4, ADI incurred $300,000 of factory overhead and produced 40,000 units of Analog model and 20,000 units of Digital model. Overhead was applied based on a predetermined overhead rate per direct labour-hour. The wage rate is $20 per direct labour-hour and total labour cost is $600,000. Based on this rate, the cost per unit of each product in 20X4 was as follows:

The market is becoming more competitive, and ADI is looking into refining its costing system by introducing ABC next year. Analysis of the 20X4 data showed that the $300,000 of overhead costs could be assigned to three activities as follows:

Overhead Costs Assigned in 20X4Setup....................................................................................$ 20,000Materials handling.................................................................60,000Equipment operations........................................................220,000.............................................................................................$300,000

Management determined that the following activity drivers were appropriate for the overhead categories:

Activity drivers and units produced in 20X4 for each model are as follows:

Required:

1. In 20X4, ADI used a single predetermined overhead rate based on DLHs to allocate overhead. Calculate the rate. How much factory overhead was allocated to the Analog model product line and how much to the Digital model product line? What is the product cost per unit of each model?

2. In 20X4, if ADI had been using ABC, how much factory overhead would have been allocated to the Analog product line and how much to the Digital model product line? Calculate the total unit cost for each model under ABC.

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Model A Model D Direct materials $ 6 $10 Direct labour 10 10 Factory overhead $ ? $ ? Total 20X4 Activity Level Activity Driver Setups Number of setups 160 setups Materials handling Quantity of materials (kilograms) 120,000 kilograms Equipment operations Machine-hours (MHs) 44,000 MHs