Lillich, Inc., manufactures and sells two products: Product U6 and Product R5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product U6 690 8.9 6,141 Product R5 1,060 5.9 6,254 Total direct labor-hours 12,395 The direct labor rate is $28.00 per DLH. The direct materials cost per unit for each product is given below:
Direct Materials
Cost per Unit
Product U6 $250.40
Product R5 $167.80
The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:
Estimated Expected Activity
Activity Cost Pools Activity Measures Overhead Cost Product U6 Product R5 Total
Labor-related DLHs $ 201,638 7,125 7,280 14,405
Production orders orders 72,840 1,350 1,250 2,600
Order size MHs 1,020,608 6,500 6,800 13,300
$ 1,295,086
Which of the following statements concerning the unit product cost of Product U6 is true? (Round your intermediate calculations to 2 decimal places.)
a. The unit product cost of Product U6 under traditional costing is greater than its unit product cost under activity-based costing by $340.31.
b. The unit product cost of Product U6 under traditional costing is less than its unit product cost under activity-based costing by $5.63.
c. The unit product cost of Product U6 under traditional costing is greater than its unit product cost under activity-based costing by $5.63.
d. The unit product cost of Product U6 under traditional costing is less than its unit product cost under activity-based costing by $340.31.