Superior Fasteners, Co Compute the Cost Per Unit Using:
(1) the Traditional Allocation

Essay

Superior Fasteners, Co. is considering switching from traditional allocation of overhead based on direct labor hours to an activity-based costing system. The manager has accumulated the following information on engineering changes for two of the company's major products:
$$\begin{array} { l | l | l } & \begin{array} { l } \text { Autom otive } \\\text { Fasteners }\end{array} & \begin{array} { l } \text { Computer } \\\text { Fasteners }\end{array} \\\hline \text { Total units produced } & 5,000 & 2,500 \\\hline \text { Cost per engineering change } & \$ 400 & \$ 400 \\\hline \text { Number of engineering changes } & 5 & 25 \\\hline \text { Direct labor hours per unit } & 4 & 4\end{array}$$ Compute the cost per unit using:
(1) The traditional allocation of the costs of engineering changes based on direct labor hours.
(2) The activity-based cost allocation of the costs of engineering changes.