BASIC PROBLEM Doaktown Products manufactures fishing equipment for recreational uses. The Miramichi plant produces the company's two versions of a special reel used for river fishing. The two models...

Extracted text: BASIC PROBLEM Doaktown Products manufactures fishing equipment for recreational uses. The Miramichi plant produces the company's two versions of a special reel used for river fishing. The two models are the M-008, a basic reel, and the M-123, a new and improved version. Cost ac- countants at company headquarters have prepared costs for the two reels for the most recent period. The plant manager is concerned. The cost report does not coincide with her intuition about the relative costs of the two models She has asked you to review the cost accounting and help her prepare a response to headquarters. Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month, manufacturing overhead was $280,000. During that time, the company produced 12,000 units of the M-008 and 2,000 units of the M-123. The direct costs of production were as follows: M-123 Total 800-M $100,000 $180,000 Direct materials Direct labor. 000'08$ .... 000'0L .... 000'00 000'0v Management determined that overhead costs are caused by three cost drivers. These driv- ers and their costs for last year were as follows: Activity Level Cost Driver Costs 800-W M-123 Total Number of machine-hours Number of production runs Number of inspections $120,000 000' 000'8 000' ... .***. 40 000'06 09 Total overhead $280,000 .... 1) Cost driver rate of machine-hours 12.95 2) Cost driver rate of production runs 3) Cost driver rate of inspections 4) Total cost of M-o08 205030.00 5) Total cost of M-123 123050.00 6) Unit cost of M-oo8 7) Unit cost of M-123 3050.00