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ADA Pharmaceutical Company produces three drugs: Diomycin, Homycin, and Addolin belonging to the analgesic (pain-killer) family of medication. Since its inception four years ago, ADA has used a direct labor hour-based system to assign manufacturing overhead costs to products. The company is considering moving to activity-based costing. ADA has the following budget information for the year: Diomycin Homycin Addolin Cost of direct materials $205,000 $265,000 $258,000 Cost of direct labor $250,000 $234,000 $263,000 Number of direct labor hours 7,200 6,800 2,000 Number of capsules 1,000,000 500,000 300,000 ADA has identified the following activities as cost drivers and has allocated them to total overhead cost of $250,000 as follows: Activity Cost Driver Budgeted Overhead Cost Budgeted Cost Driver Volume Machine setup Setup hours $16,000 1,600 Plant management Workers 36,000 1,200 Supervision Direct labor hours 46,000 1,150 Quality inspection Inspection hours 50,400 1,050 Expediting orders Customers served 51,600 645 Total overhead $200,000 The company gathered the following information about the cost driver volume for each product: Diomycin Homycin Addolin Machine setups 200 600 800 Plant management 200 400 600 Supervision 200 300 650 Quality inspection 150 200 700 Expediting orders 45 100 500 Required a. Use the firms current costing system to calculate the total unit cost of each product. b. Use the activity-based costing system to calculate the total unit cost of each product.

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