Syscom Inc. is in the business of developing software for Internet applications. The market is very competitive, and Syscom's competitors continue to introduce new products at low prices. The company offers a wide variety of software, from simple programs that enable new users to create sophisticated web pages to complex commercial database engines. Syscom's raw material costs are insignificant. Syscom has just hired Alison Wetherby, a recent university graduate in Accounting. Wetherby asks software department manager Valerie Thibault to join her in a pilot activity-based costing study. Wetherby and Thibault identify the following activities, related costs, and cost allocation bases for all the indirect costs relating to the software manufacturing process: ACTIVITY Applications development ESTIMATED NUMBER OF ESTIMATED TOTAL INDIRECT ACTIVITY ACTIVITY COST COST DRIVER COST DRIVER UNITS $4,000,000 New apps Content production $4,400,000 Lines of code 1,800,0000 Testing Testing $728,000 hours 1,800 Syscom is planning to develop the following new applications: PagePrimeX -- software for developing e-business web pages. SecurShieldX -- commercial security and firewall software. PagePrimeX requires 500,000 lines of code and 100 hours of testing, while SecurShieldX requires 7.5 million lines of code and 600 hours of testing. Syscom expects to produce and sell 30,000 units of PagePrimeX and 10 units of SecurShieldX. Required: 1. Compute the cost allocation rate for each activity. 3 marks. 2. Use the activity-based cost allocation rates to compute the indirect cost per unit of each new application, PagePrimeX and SecurShieldX. 8 marks. 3. Syscom's original allocation-based cost system uses a single allocation base to allocate indirect costs to products at $100 per programmer hour. PagePrimeX requires 5,000 programmer hours, while SecurShieldX requires 14,000 programmer hours. Compute the total indirect costs allocated to PagePrimex and SecurShieldX under the original system. Then, compute the indirect cost per unit for each product. 6 marks. 4. Compare the activity-based cost per unit to the costs from the simpler original system. How have the unit costs changed? Explain why the costs changed as they did. 3 marks.