A company produces two versions of treadmills: a standard and a deluxe. The deluxe is wider and sturdier and offers monitoring of heart rate, etc. This is the data for the beginning of the year:
** (Information about treadmills in attachment) **
Questions to answer:
#1. What is the cost per unit for each product using direct labor hours to assign all overhead costs?
#2. Form homogenous cost pools, and calculate pool rates. Explain why you would group activities in the pools that are formed.
#3. Using the pool rates computed in Question #2; calculate the cost per unit for each product. Compare these costs with those calculated using the functional based method. Which cost is the most accurate?
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The costs per units and pool rates for two versions of treadmills are determined.