CMS 001 Fisico Company produces exercise bikes.

| June 13, 2018

Fisico Company produces exercise bikes. One of its plants produces two versions: a standardmodel and a deluxe model. The deluxe model has a wider and sturdier base and a variety ofelectronic gadgets to help the exerciser monitor heartbeat, calories burned, distance travelled, etc.At the beginning of the year, the following data were prepared for this plant:Standard Model Deluxe ModelExpected quantity 30,000 15,000Selling Price $ 370 $ 700Prime costs $ 4.5 million $ 5.25 millionMachine Hours 37,500 37,500Direct labour hours 75,000 75,000Engineering support (hours) 13,500 31,500Receiving (orders processed) 3,000 4,500Materials handling (number of moves) 15,000 45,000Purchasing (number of requisitions) 750 1,500Maintenance (hours used) 6,000 24,000Paying suppliers (invoices processed) 3,750 3,750Setting up batches (number of setups) 60 540Additionally, the following overhead activity costs are reported:Maintenance $ 600,000Engineering support 900,000Materials handling 1,200,000Setups 750,000Purchasing 450,000Receiving 300,000Paying suppliers 300,000—————————————-Required:a. Calculate the cost per unit for each product using direct labour hours to assign all overheadcosts.b. Calculate activity rates and determine the overhead cost per unit. Compare these costs withthose calculated using the unit-based method. Which cost is the most accurate? Explain.$ 4,500,000

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