This chapter emphasizes the use of activity$-$based costing in internal decisions. However, a modified form of activity$-$based costing can also be used to develop product costs for external financial reports. For this purpose, product costs include all manufacturing costs and exclude all nonmanufacturing costs. This problem illustrates such a costing system.

Stiller Co$.$ makes two products and uses a traditional costing system in which a single plantwide predetermined overhead rate is computed based on direct labor hours. Data for the two products for the upcoming year follow:

$\backslash$table$[[,$Doka,Excel$],[$Direct materials cost per unit,$$27,$$$14$