Carson Company produces a regular computer monitor that sells for $175 and a premium computer monitor that sells for $300. Last year, total overhead costs of $3,675,000 were allocated based on direct labor hours. A total of 63,000 direct labor hours were required last year to build 36,000 regular monitors (1.75 hours per unit), and 42,000 direct labor hours were required to build 12,000 premium monitors (3.50 hours per unit). Total direct labor and direct materials costs for last year were as follows:

The management of Carson Company would like to use activity-based costing to allocate overhead rather than one plantwide rate based on direct labor hours. The following estimates are for the activities and related cost drivers identified as having the greatest impact on overhead costs.

Required:

a.  Calculate the direct materials cost per unit and direct labor cost per unit for each product. 

b. 1. Using the plantwide allocation method, calculate the predetermined overhead rate and determine the overhead cost per unit allocated to the regular and premium monitors.

2. Using the plantwide allocation method, calculate the product cost per unit for the regular and premium monitors. Round results to the nearest cent.

c. 1. Using the activity-based costing allocation method, calculate the predetermined overhead rate for each activity.

2. Using the activity-based costing allocation method, allocate overhead to each product. 

3. What is the product cost per unit for the regular and premium monitors?

d. Calculate the per unit profit for each product using the plantwide approach and the activity- based costing approach.

e. How much did the profit per unit change for each product when moving from the plantwide approach to the activity-based costing approach? What caused this change?

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Regular Monitor Premium Monitor $1,908,000 $ 900,000 $1,200,000 Direct materials Direct labor $1,728,000 Estimated Cost Driver Activity Estimated Overhead Costs Regular Premium 600 Cost Driver Activity Total Purchase orders Production setups Quality inspections Packaging and shipping Number of units shipped Total Number of purchase orders $1,200,000 Number of setups Inspection hours 400 120 3,600 36,000 1,000 150 12,000 48,000 30 $ 600,000 12,000 $3,675,000