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Activity-Based versus Traditional Costing Rodent Corporation produces two types of computer mice, wired and wireless. The wired mice are designed as low-cost, reliable input devices. The company only recently began producing the high-quality wireless model. Since the introduction of the new product, profits have been steadily declining Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing. Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was $360,000 based on production of 140,000 wired mice and 50,000 wireless mice. Direct labor and direct materials costs were as follows: Wired Wiress Total Direct materials S 187,500 $ 171.000 $ 358,500 Direct labor 290,100 109,900 400.000 Management has determined that overhead costs are caused by three cost drives. These drivers and their costs for the last year are as follows: Activity Level Wired Wireless Total S Cost Driver Number of production runs Quality tests performed Shipping orders processed Cost Assigned 165,000 148,500 46,500 360,000 50 25 S 9 300 Required: 1. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead under activity-based costing? Wired Mouse Wireless Mouse 2. Under activity-based costing, what is the product cost per unit produced for each product? Wired Mouse _ Wireless Mouse 3. How much overhead will be assigned to each product if direct labor cost is used to allocate overhead? Wired Mouse Wireless Mouse 4. Under the traditional costing method, where direct labor cost is used to allocate overhead, what is the product cost per unit produced for each product? Wired Mouse Wireless Mouse