a, b

Exercise 5-10B Computing product cost with given activity allocation rates Using automated production processes, Pruitt Videos produces two models of digital camcorders: N100 for the novice and D200 for the hobbyist. The company has found activity-based costing useful in assigning overhead costs to its products. It has identified the following five major activities involved in producing the camcorders. Activity Allocation Base Allocation Rate Materials receiving and handling Cost of materials 3% of materials cost Production setup Number of setups $400 per setup Assembly Number of parts $5 per part Quality inspection Inspection time $12.50 per minute Packing and shipping Number of orders $40 per order Activity measures for the two models of camcorders follow. N100 Labor Cost Materials Cost* Number of Setups Number of Parts Inspection Time Number of Orders $125,000 $70,000 10 10,000 800 minutes 25 80,000 90.000 25 10,000 4,800 minutes 50 D200 Both are direct costs Required a. Compute the cost per unit of N100 and D200, assuming that Pruitt made 5,000 units of N100 and 2,500 units of D200. b. Explain why the D200 camcorders cost more to make although their direct costs are less than those for the N100 camcorders