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Compute cost-driver rate for Drugs R' Us

Compute cost-driver rate for Drugs R' Us, use ABC (activity based costing) and traditional costing system to find the total cost and unit cost for the product.

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Compute cost-driver rate for Drugs R' Us, use ABC (activity based costing) and traditional costing system to find the total cost and unit cost for the product.

a. Compute the cost-driver rate for each cost-driver base.

You need to divide the total cost for each cost-driver base with the activity volume.

Unit Level
1.1 Material for Product A $60,000/1,000,000 units = $0.06 per unit
1.2 Direct labor for Product A $20,000/2,000 hours = $10 per hour
1.3 Material for Product B $80,000/800,000 units = $0.10 per unit
1.4 Direct labor for Product B $30,000/2,000 hours = $15 per hour

Batch Level
2.1 Quality control $30,000/100 batches = $300 per batch

Product Level
3.1 Product-level advertising $100,000/100 promotions = $1,000 per promotion
3.2 Product-level records $20,000/2 product =$10,000 per product

Customer Level
4.1 Customer product orders $40,000/2,000 orders = $20 per customer order
4.2 Customer ...

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