Rice Inc. manufactures lawn mowers and garden tractors. Lawn mowers are relatively simple to produce and are made in large quantities. Garden tractors are
customized to individual wholesale customer specifications. The company sells 300,000 lawn mowers and 30,000 garden tractors annually. Revenues and costs
incurred for each product are as follows:
Law Mower Garden Tractors

Rev $19,500,000 $17,850,000

DM 4,000,000 2,700,000

DL ($20/Hr) 2,800,000 6,000,000

Overhead ? ?

Manufacturing overhead totals $3,960,000, and administrative expenses equal $7,400,000.
a. Calculate the profit (loss) in total and per unit for each product if overhead is assigned to product using a per-unit basis.
b. Calculate the profit (loss) in total and per unit for each product if overhead is assigned to products using a direct labor hour basis.
c. Assume that manufacturing overhead can be divided into two cost pools as follows: $1,320,000, which has a cost driver of direct labor hours, and $2,640,000,
which has a cost driver of machine hours (totaling 150,000). Lawn mower production uses 25,000 machine hours; garden tractor production uses 125,000 machine
hours. Calculate the profit (loss) in total and per unit for each product if overhead is assigned to products using these two overhead bases.
d. Does your answer in (a), (b), or (c) provide the best representation of the profit contributed by each product?Explain.