2. (25 Points) RightOn Corporation manufactures travel clocks and watches. The $210,000 in overhead coet is currently allocated using direct labor houre, but the controller has recommended an activity-based costing system using the data that follows: Activity Level Watches 15 setups Production Setup Material Handling Packing & Shipping Total Overhead Activity Cost Driver Clocks # of Setups # of Parts #units shipped 10 setups 18 parts 45,000 units 36 parts 75,000 units Clocks Watches 105,000 hours # of labor hours 35,000 hours Additionally, the overhead cost can be divided into two pools: Engineering & Technical Support (ETS) and Building & Maintenance (BM). ETS is responsible for $100,000 and BM for $110,000 of the total overhead. Additionally, in looking at time sheets of the employees, the following distribution of work was determined. Engineering & Tech Support Activity Production Setup Building & Maintenance 10% 60% Material Handling 10% 10% Packing & Shipping 30% 80% a) (10 points) What is the cost per product (clocks and watches) under the current system? b) (10 Points) Draw the corresponding diagram and find the cost per product (clocks and watches) under an ABC system? c) (5 Points) What do you observe when comparing your solutions in (a) and (b)