Applications
Development $1500000 New applications 3 new applications Content Production 2700000 Lines of code 9 million lines Testing 270000 Testing hours 1500 testing hours X-PAGE requires 480000 lines of code and 70 hours of testing. X-SECURE requires 7200000 lines of code and 420 hours of testing. Gibson expects to produce and
sell 25000 units of X-PAGE and 9 units of X-SECURE. REQUIRED: 1) Compute the cost allocation rate for each activity. 2) Use the activity-based cost allocation rates to compute the indirect cost of each unit of X-PAGE and X-SECURE. 3) X-PAGE requires 14000 programmer hours while X-SECURE requires 21000 programmer hours. Compute the indirect costs allocated to X-PAGE and X-SECURE under the
original system. 4) Compare the activity-based costs per unit to the unit costs from the simpler original system. Explain the differences in the costs using the two different
methods. 5) List three disadvantages that Gibson might find in using the activity-based system rather than the traditional costing system.