3 Sharma Chemical Company produces three products. The operating results of the current year are: Product A B C Sales Qty Target Price Actual Price Difference 1,000 $285.00 $ 286.00 $ 5,000 $ 297.60 $ 255.60 $ 500 $202.50 $ 310.00 $ 1.00 (42.00) 107.50 The firm sets the target price of each product at 150% of the product's total manufacturing cost. It appears that the firm was able to sell Product C at a much higher price than the target price of the product and lost money on Product B. Rohan Sharma (this name seems very familiar), CEO, wants to promote Product C much more aggressively and phase out Product B. He believes that the information suggests that Product C has the greatest potential among the firm's three products because the actual selling price of Product C was almost 50% higher than the target price, while the firm was forced to sell Product B at a price below the target price. Both the budgeted and actual factory overhead for the current year are $510,000. The actual units sold for each product also are the same as the budgeted units. The firm uses direct labor dollars to assign manufacturing overhead costs. The direct materials and direct labor costs per unit for each product are: Direct Materials $ Product A Product B 50.00 $ 114.40 $ Product C 65.00 Direct Labour $ 20.00 $ 12.00 $ 10.00 Total Prime Cost $ 70.00 $ 126.40 $ 75.00 The controller, Anji, noticed that not all products consumed factory overhead similarly Upon further investigation, she identified the following usage of factory overhead during the year: Total OH Product A Product B Product C Number of Setups 2 5 3 $ 9,000 Weight of DM (lbs) 400 250 350 $110,000 Waste & Hazardous Disposal 25 45 30 $ 250,000 Quality Inspections 30 35 35 $ 75,000 Utilities (Machine Hours) Total 2,000 7,000 1,000 $ 66,000 $510,000 Required: 1) Determine the product (manufacturing) cost per unit for each of the products using the volume-based method (traditional costing). Then, compute the gross margin per unit for each product to determine the most and least profitable product line. 2) Repeat requirement 1 using the activity-based costing method. 3) What is the new target price for each product based on 150% of the new costs under the ABC system? Compare this price with the actual selling price. 4) Comment on the result from a competitive and strategic perspective. As a manager of Sharma Chemical, describe what actions you would take based on the information provided by the ABC unit costs