Problem 4-118 [LO 1, 4, 6]

Pelles, Inc. produces two different products, Product A and Product B. Pelles uses a traditional volume-based costing system in which direct labor hours are the allocation base. Pelles is considering switching to an ABC system by splitting its manufacturing overhead cost across three activities: Design, Production, and Inspection. The cost of each activity and usage of the activity drivers are as follows:

	Cost		Usage by Product A	Usage by Product B
Design (Engineering Hours)	$	445,200	370	470
Production (Direct Labor Hours)	$	690,500	117,000	317,000
Inspection (Batches)	$	318,200	470	270

Pelles manufactures 11,700 units of Product A and 9,200 units of Product B per month.

Required:
a.	Calculate the predetermined overhead rate under the traditional costing system. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Predetermined overhead rate

$

b.	Calculate the activity rate for Design. (Omit the "$" sign in your response.)

Activity rate

$ /hour

c.	Calculate the activity rate for Machining. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Activity rate

$ /hour

d.	Calculate the activity rate for Inspection. (Omit the "$" sign in your response.)

Activity rate

$ /batch

e.	Calculate the indirect manufacturing costs assigned to each unit of Product A under the traditional costing system. (Round your intermediate calculations to two decimal places. Round your answer to 2 decimal places.Omit the "$" sign in your response.)

Indirect manufacturing costs

$ per unit

f.	Calculate the indirect manufacturing costs assigned to each unit of Product B under the traditional costing system. (Round your intermediate calculations to two decimal places. Round your answer to 2 decimal places.Omit the "$" sign in your response.)

Indirect manufacturing costs

$ per unit

g.	Calculate the indirect manufacturing costs assigned to each unit of Product A under the ABC system.(Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Indirect manufacturing costs

$ per unit

h.	Calculate the indirect manufacturing costs assigned to each unit of Product B under the ABC system.(Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Indirect manufacturing costs

$ per unit

i.	Which product is under-costed and which is over-costed under the volume-based cost system compared to ABC?

Product A	(Click to select)under-costedover-costed
Product B	(Click to select)under-costedover-costed