6. P Company is considering using activity-based costing instead of its traditional costing system because it believes its current system may be providing misleading information. The following data shows the budgeted manufacturing overhead. Budgeted Budgeted Activity Cost Driver Activity Cost Materials handling No. of units handled 1,200,000 $720,000 Setup costs No. of setups 750 315,000 Machining costs Machine hours (MH) 30,000 540,000 Quality control No. of batches 500 225,000 Total overhead cost $1,800,000 The company also estimates that it will work 50,000 direct labor hours in the coming year. The following information is provided for one of the companys products for the coming year: Direct material and Direct Labor Direct materials cost per unit $4.40 Direct labor cost per unit .05 DLH @ $15/DLH .75 Total $5.15 Sales and production data: Expected sales 20,000 units (4 batches) Batch size 5,000 units Setups 2 per batch Machine hour required 80 MH per batch

a. Determine the total cost per unit for the coming year if the organization uses a traditional full cost system based on machine hours (show your work, either here or in Excel). (Compute overhead cost per MH, then compute cost per batch, then divide by number of units in a batch to get overhead cost per unit. Then add matl and labor cost per unit to get unit cost).

b. Determine the total cost per unit for the coming year if the organization uses an activity-based costing system (show your work, either here or in Excel). (Compute each activity rate, calculate overhead cost for each activity to get total overhead cost, divide by total units to get overhead cost per unit. Then add matl and labor cost per unit to get unit cost).