For many years, Zapro Company manufactured a single product called a mono-relay. Then three years ago. the company automated a portion of its plant and at the same time introduced a second product called at bi-relay that has become increasingly popular. The bi-relay is a more complex product, requiring one hour of direct labor time per unit to manufacture and extensive machining in the automated portion of the plant. The mono-relay requires only 0.75 hours of direct labor time per unit and only a small amount of machining. Manufacturing overhead costs are currently assigned to products on the basis of direct labor-hours. Despite the growing popularity of the company's new bi relay, profits have been declining steadily. Management is beginning to believe that there may be a problem with the company's costing system. Material and labor costs per unit are as follows:
Management estimates that the company will incur 1,000,000 in manufacturing overhead costs during the current year and 40,000 units of the mono-relay and 10,000 units of the bi-relay will be produced and sold.
(a) Compute the predetermined manufacturing overhead rate assuming that the company continues to apply manufacturing overhead cost on the basis of direct labor-hours. Using this rate and other data from the problem, determine the unit product cost of each product.