Direct labor per unit, 3 hours at $12 per hour — Ontario Inc manufactures two products Standard and Enhanced applies overhead the basis

Ontario, Inc. manufactures two products, Standard and Enhanced, and applies overhead on the basis of direct-labor hours. Anticipated overhead and direct-labor time for the upcoming accounting period are $800,000 and 25,000 hours, respectively. Information about the company’s products follows.

Standard:

Estimated production volume, 3,000 units

Direct-material cost, $25 per unit

Direct labor per unit, 3 hours at $12 per hour

Enhanced:

Estimated production volume, 4,000 units

Direct-material cost, $40 per unit

Direct labor per unit, 4 hours at $12 per hour

Ontario’s overhead of $800,000 can be identified with three major activities: order processing ($150,000), machine processing ($560,000), and product inspection ($90,000). These activities are driven by number of orders processed, machine hours worked, and inspection hours respectively. Data relevant to these activities follow.

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Top management is very concerned about declining profitability despite a healthy increase in sales volume. The decrease in income is especially puzzling because the company recently undertook a massive plant renovation during which new. highly automated machinery was installed—machinery that was expected to produce significant operating efficiencies.

Required:

1. Assuming use of direct-labor hours to apply overhead to production, compute the unit manufacturing costs of the Standard and Enhanced products if the expected manufacturing volume is attained.

2. Assuming use of activity-based costing, compute the unit manufacturing costs of the Standard and Enhanced products if the expected manufacturing volume is attained.