Pasternik Company produces and sells two products,Alpha and Zeta.The following information is available relating to its setup activities:

Assume the cost per setup remains at $2,000 but that the batch size for product Alpha is changed from 10 to 25 units per batch.Using activity-based costing and a volume-based overhead costing that uses direct labor-hours to assign overhead,the amount of setup cost applied to each unit of product Alpha would be (rounded to the nearest cent):

A)A
B)B
C)C
D)D
General Calculations:
# of Alpha batches = 250/25 = 10
# of Zeta batches = 20,000/500 = 40
Total number of batches = 50 = 10 + 40
Total Set-up Cost = $2,000 x 50 batches = $100,000
Set-up cost per direct labor hour = $100,000/40,000 total direct labor hours = $2.50 per direct labor hour
Alpha Activity-Based:
Total Set-up Cost = 10 x $2,000 = $20,000
$20,000/250 units = $80 per unit
Alpha Volume-Based:
Set-up cost for Alpha = $2.50 x 1,000 Alpha direct labor hours = $2,500
Total Alpha Units Produced = 250 units
Alpha overhead cost per unit = $2,500/250 units = $10

Customer Profitability Analysis

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