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4. Short Round Inc manufactures two types of hats, fedoras and baseball caps. Fedoras require 2 hours of direct labor per unit to manufacture fedoras

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4. Short Round Inc manufactures two types of hats, fedoras and baseball caps. Fedoras require 2 hours of direct labor per unit to manufacture fedoras compared to 1 hour of direct labor per unit to produce baseball caps. Overhead is currently allocated to the two products on the basis of direct labor hours. Short Round estimated it would incur $510,000 in manufacturing overhead costs, and produce 10,000 units of fedoras and 40,000 units of baseball caps during the current year. Unit costs for direct materials and direct labor are as follows: Baseball Caps Fedoras Direct materials per unit $11 $24 Direct labor per unit $6 $12 a. What is the unit product cost of each product under the current overhead allocation method? You must show your burden rate calculations in order to receive full credit for this part of the problem. b. Short Round is considering the use of activity-based costing as an alternative to its current overhead allocation method. Data relating to the company's activity cost pools for the current year are given below: Expected Activity Levels Estimated OH costs | Baseball Caps Fedoras Total Machine setups $204.000 800 1,600 2.400 Purchase orders $43,500 500 100 600 Machine-hours $105,000 7,000 10,500 17,500 Maintenance requests $157,500 650 850 1,500 Using the data above, what is the revised unit product cost of each product under the activity- based costing system? You must show your burden rate calculations in order to receive full credit for this part of the problem. c. Compare your answers to parts a and b. What overhead activities seem to contribute to the differences you observe

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