Heithoff Company makes two products and is implementing an Activity Based Costing (ABC) system. Previously, all overhead had been applied on the basis of machine hours. The Company produces 100,000 units of product A and 5,000 units of product B.
Cost Pool Driver and Level Cost in Pool Use of Driver by Use of Driver by
Product A Product B
- Equipment Setup 500 setups $1,000,000 350 setups 150 setups
- Materials Ordering 10,000 orders $2,000,000 7,000 orders 3,000 orders
- Quality Control 4,000 inspections $500,000 2,000 inspections 2,000 inspections
- Machining 50,000 mach. hrs $5,000,000 40,000 mach. hrs 10,000 machine hours
What is the overhead cost per unit for Product B using ABC?