5-28 Activity-Based Costing Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under this allocation system, product A has been assigned overhead of $10.80 per unit, while product B has been assigned $3.60 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information: Cost Pools Activity Costs Cost Drivers Machine setup Materials handling Electric power $360,000 100,000 40,000 Setup hours Pounds of materials Kilowatt-hours Activity Driver Consumption 4.000 20.000 40.000 The following cost information pertains to the production of A and B, just two of Hakaras many products: 4,000 Number of units produced Direct materials cost $42,000 $24,000 Direct labor cost 20,000 $54,000 $40,000 200 3,000 4,000 400 Number of setup hours Pounds of materials used 1,000 2,000 Kilowatt-hours Required 1. Use activity-based costing to determine a unit cost for each product. 2. Comment on management's belief that the ABC system will generate an overhead allocation that is more accurate than the volume-based system currently in use