12 Question 3 Belknap Manufacturing has approached you, a CGA, with a problem. The company makes two products: A12 and B15. Demand for B15 has been overwhelming: there is virtually no competition for this item and several customers have offered to pay up to $48.00 for this product, which Belknap has priced at $27.00 per unit. The prime cost of manufacture for B15 is $6.26. Fatima, the company president, is puzzled since the demand for B15 has not resulted in increased company profitability. The company's costing system assigns overhead to the products based on direct labour-hours. The following information has been made available to you: Overhead (OH) cost pools and activity levels for 2008: OH Cost Pool Activity Base Planned Activity Level Budget (5) Rate (5) Setup Batches 30 batches 24,000 800 Material moves Material moves 90 moves 90,000 1,000 Order processing Number of orders 140 orders 210,000 1,500 Engineering Engineering hours 10,000 hours 200,000 20 Machine maintenance Machine hours 18,000 hours 162,000 9 For 2008, the company anticipates a total of 27,440 direct labour-hours will be used. Planned activity for product BIS, which is produced in batches of 1,000 units, are as follows: Activity Planned Activity Level Planned production 10,000 units Material moves 20 moves Number of orders 50 orders Engineering hours 2,500 hours Machine hours 6,000 hours Direct labour-hours 5,000 hours Required Write a brief memo to Fatima explaining why product B15 has not increased Belknap's profitability, Provide supporting calculations. Your memo should clearly explain why there is no apparent competition for product B15, why customers are willing to pay almost double the price per unit for this product, and what action(s) you recommend for Fatima. Your memo should be three or four paragraphs and must not exceed 350 words in length. You should perform all of the necessary calculations first and then write your memo. Minta