Xnet develops software for intemet applications. The market is very competitive and Xnets's competitors continue to introduce new products at low prices. Xnet offers a wide variety of software $-$ from simple programs that enable new users to create personal web pages to complex commercial search engines. Like most software companies, XNet's raw material costs are insignificant.

Xnet has just hire Alex Acer, a recent graduate in accounting. Alex asks the software development Manager, Emily Easton, to join her in a pilot activity$-$based costing study.

Acer and Easton identify the following activities, related annual costs and cost allocation bases:

$\backslash$table$[[$Activity$,$Estimated cost,Allocation base,$\backslash$table$[[$Estimated quantity of$],[$allocation base$]]],[$Applications development,$$1,600,000,$New applications,$4$ new applications$],[$Content production,$2,400,000,$Lines of code,$12$ million lines$],[$Testing$,288,000,$Testing hours,$1,800$ testing hours$],[$Total indirect costs,$$4,288,000,,]]$

The following information is available for $2$ of the applications:

$x$ page$-$software for developing personal webpages

Requires $500,000$ lines of code

Requires $100$ hours of testing

Estimated units to be sold $=30,000$ units

X$-$Secure $-$ commercial security and firewall soltware

Requires $7,500,000$ lines of code

Requires $600$ hours of testing

Estimated units to be sold $=10$ units.

Required:

Compute the cost allocation rate for each activity.

Use the activity$-$based cost allocation rates to compute the indirect cost of each unit of $x$ Page and $x-$Secure $($hint: Compute the total activity costs allocated to each product line and then compute the cost per unit$)$

Xnet's original single alocation$-$based cost system allocated indirect costs to product it $$100$ per programmer hour. X$-$Page requires $10,000$ programmer hours while X$-$Secure requires $15,000$ programmer hours. Compute the indirect costs allocated to X$-$Psge and $x-$Secure under the original system. Then, compute the indirect cost per unit for each product.