OBJECTIVE 2 Problem 4.31 Unit-Based versus Activity-Based Costing Fisico Company produces exercise bikes. One of its plants produces two versions: a standard tronic gadgets to help the exerciser monitor heartbeat, calories burned, distance traveled, etc. At the beginning of the year, the following data were prepared for this plant: Deluxe Model Standard Model Expected quantity Selling price Prime costs Machine hours Direct labor hours Engineering support (hours) Receiving (orders processed) Materials handling (number of moves) Purchasing (number of requisitions) Maintenance (hours used) Paying suppliers (invoices processed) Setting up batches (number of setups) 30,000 $370 $4.5 million 37,500 75.000 13.500 3,000 15.000 750 6,000 3.750 60 15,000 $700 $5.25 million 37,500 75,000 31,500 4,500 45,000 1.500 24,000 3,750 540 Additionally, the following overhead activity costs are reported: Maintenance Engineering support Materials handling Setups Purchasing Receiving Paying suppliers $ 600,000 900,000 1,200,000 750,000 450,000 300,000 300,000 $4,500,000 Required: 1. Calculate the cost per unit for each product using direct labor hours to assign all overhead costs. 2. Calculate activity rates and determine the overhead cost per unit. Compare these costs with those calculated using the unit-based method. Which cost is the most accurate? Explain