Reference no: EM133136789

Question - Aigo Mobile, produces two smartphones: Basic, which retails for $500 per unit, and Pro, the latest smartphone launched at $900 per unit. Aigo Mobile wants to optimize the pricing and cost management of each product line. In 2021, Aigo Mobile will produce 10,000 Basic units and 15,000 Pro units. Currently, overhead is allocated based on Machine Hours.The Aigo Mobile controller wondered if the current accounting system had provided the best information for making selling pricing decisions. After meeting with key managers and several operations and sales staff, the Aigo Mobile Controller agreed to implement ABC and define four activities: machine set-up, production, quality control, and delivery. Aigo Mobile has also compiled the following information on the company's manufacturing overhead costs for the year ended December 31, 2021

Aactivity(Allocation Base)	Total Activity Cost	Activity Trigger Unit
		Basic	Pro
Machine set-up (number of set-ups)	930,000	8,000	22,000
Production (number of machine hours)	1,350,000	150,000	300,000
Quality Control (number of inspections)	1,440,000	32,000	64,000
Shipping (shipping amount)	105,000	100	150

 

	Basic	Pro
Direct Raw Materials per unit	40	70
Direct Labor Cost per hour	32	32
Direct Labor Hours per unit	2.80	4.25

Required -

1. Calculate production costs per unit using traditional costing for each product.

2. Calculate production cost per unit using ABC costing for each product.