Step-by-Step Solution:

(a) Compute the unit activity costs for each of the cost drivers

To compute the unit activity cost for each cost driver, divide the total cost for each pool by the total number of activities for that driver across both products.

1. Unit Cost per Materials Requisition: Total requisitions = $12 + 8 = 20$
   Unit cost = $\frac{10,000}{20} = 500$

2. Unit Cost per Machine Setup: Total setups = $35 + 115 = 150$
   Unit cost = $\frac{90,000}{150} = 600$

3. Unit Cost per Hour of Machine Operation: Total hours = $3,000 + 1,500 = 4,500$
   Unit cost = $\frac{135,000}{4,500} = 30$

4. Unit Cost per Product Inspection: Total inspections = $25 + 55 = 80$
   Unit cost = $\frac{22,000}{80} = 275$

(b) Assign overhead costs to products 001 and 002 using activity-based costing

For each product, calculate the overhead costs by multiplying the quantity of each activity by its corresponding unit cost.

1. Materials Requisitions:

   • Product 001 = $12 \times 500 = 6,000$
   • Product 002 = $8 \times 500 = 4,000$

2. Machine Setups:

   • Product 001 = $35 \times 600 = 21,000$
   • Product 002 = $115 \times 600 = 69,000$

3. Machine Operation:

   • Product 001 = $3,000 \times 30 = 90,000$
   • Product 002 = $1,500 \times 30 = 45,000$

4. Product Inspection:

   • Product 001 = $25 \times 275 = 6,875$
   • Product 002 = $55 \times 275 = 15,125$

Overhead Costs Assigned

Summary:

1. Unit Costs per Activity Driver:

   • Materials Requisition: $500
   • Machine Setup: $600
   • Machine Operation: $30
   • Product Inspection: $275

2. Overhead Costs Assigned:

   • Product 001: $123,875
   • Product 002: $133,125

Would you like to see further detailed calculations or have questions about the methodology?

Related Questions:

1. How do the results differ if traditional costing is applied instead of activity-based costing?
2. What insights can management derive from the overhead allocation using activity-based costing?
3. How does increasing or decreasing activity levels impact unit costs and total overhead?
4. What are the main benefits of using activity-based costing in a manufacturing environment?
5. Can you provide an example of how this costing method can improve pricing strategies?

Tip:

Activity-based costing offers more precise overhead allocation, which helps in understanding the true cost of products and making better strategic decisions.