2. More advanced ABC Cloud Lid manufactures two types of radios: a standard model and a smaller portable model. The standard model sells for $35 and the portable for $24. The production costs calculated on a per unit basis for each model this year were s: follows Traditional Costing Standard Portable Direct materials $ 9.50 : 6.00 Direct labour (#10 per hour) 8.00 5.00 Manufact. overhead ($17 08 per DLH) 13.66 8.54 Totell per unit cost $31 16 $19.54 During the year, Cloud Lid manufactured 50,000 standard radios and 20,000 portable radios. The overhead application rate of $17 08 per direct labour hour was determined by dividing total expected manufacturing overhead of $854,000 by the total estimated direct labour hours (50,000) for the two models. Under traditional costing, the per unit gross profits for the two models were as follows: Standard Portable Per unit selling price :35.00 10096 $24.00 10076 Per unit cost 31 16 8996 19.54 Per unit gross profit 5 3.84 1196 $ 4.46 As the gross profit (in both dollars and percentage terms)on the portable model far exceeded that for the standard, company management are planning to emphasis: the portable model in subsequent advertising and marketing activities. However, before finalizing the advertising and marketing plan the company's management accountant was asked to prepare a product costing analysis using activity-based costing (ABC). The management accountant accumulated the following information about overhead for the current year. Activities Cost drivers Estimated Expected use Activity-based overhead of cost drivers overhead rate Purchasing Number of $179,000 4,475 $40 per order orders Machine Number of $195,000 780 $230 per set-up set-ups Assembly Machine $320,000 80,000 $4 per machine hours hour Quality control Tests and $160,000 8,000 $20 per test inspections