Compute the unit cost of both the basic and deluxe toaster using both the unit-based approach and the activity-based costing approach. Use this data to prepare a sample budgeted income statements and balance sheets based on the costing data you calculated. You can make your own assumptions related to the number needed to complete these statements.

PopUp Company produces two types of toasters, basic and deluxe. For the current period, the company reports the following data:
	Basic Toaster	Deluxe Toaster
Volume	20,000 units	5,000 units
Machine Hours	1,000	2,400
Batches	315	125
Engineering Modifications	20	50
Prime Costs	$20,000	$30,000
Market Price	$25 per unit	$60 per unit
Additional Information Follows
	Costs	Driver
Engineering Support	$15,900	Engineering Modifications
Electricity	25,000	Machine Hours
Setup costs	33,900	Batches
1) Compute the manufacturing cost per unit of each toaster using the current unit-based approach.
Under this system costs are assigned to the toasters on the basis of machine hours.
2) Compute the manufacturing cost per unit of each toaster using an activy-based costing approach
ANSERS:
Answer 1.
Predetermined Overhead rate = $74,800 (Total overhead) / 3,400 Mach Hrs
Predetermined Overhead rate = $22 per mach. hr.
Calculation of Cost per Unit
Under Unit Based Approach
	Basic Toaster	Deluxe Toaster
Prime Costs	20,000	30,000
Overhead	22,000	52,800
Total Manufacturing Costs	42,000	82,800
No. of Units	20,000	5,000
Cost per Unit	2.10	16.56
Answer 2.
Activity Cost Pool	Estimated Overhead	Expected use of Cost Drivers	Activity-Based Overhead rate
Engineering Supports	15,900	70	227.14	per Engg. Modification
Electricity	25,000	3,400	7.35	per machine hour
Setup Costs	33,900	440	77.05	per batch
Alocation of Overhead Cost
Under ABC
Particulars	Basic Toaster	Deluxe Toaster	Total
Engineering Supports	4,543	11,357	15,900
Electricity	7,353	17,647	25,000
Setup Costs	24,269	9,631	33,900
Overhead Cost per Unit	36,165	38,635
Calculation of Total Cost
Under ABC
	Model
	Home	Commercial
Prime Cost	20,000	30,000
Overhead Cost	36,165	38,635
Total Unit Cost	56,165	68,635
No. of Units	20,000	5,000
Cost per Unit	2.81	13.73