5. BIG X1 Company, manufactures three different products, BIG1X, BIG2X, and BIG3X. Management has become concerned about the accuracy of its costing system. 2 BIG1X BIG2X BIG3X The company expected to produce and sell the following units of each product: Direct labor hours required to produce one unit of each product. Overhead is applied to products on the basis of direct labor-hours. 1,500 2,000 5,000 4.00 5.00 4.50 Required: At the beginning of the current year, management estimated overhead costs of $800,000 a. Compute the predetermined overhead rate using direct labor-hours as the basis for allocating overhead costs to products. (3 points) b. Compute the manufacturing overhead cost per unit of each product. (2 points) The company is considering using activity-based costing to cost its products. A team was formed to investigate this idea. The team recommends that three activity cost pools be used. These cost pools and their associated activities are listed as follows: Estimated Expected Activity for products Activity Cost Pool and (Activity Measure) Overhead C Purchase orders (number of orders) Product testing (number of tests) Machine-related (machine-hours) BIG1X BIG2X BIG3X Total $20,000 300,000 100 1400 300 400 800 1,200 2,400 5,000 480,000 1,000 2,500 4,500 8,000 $800,000 c. Compute the activity rate for each activity cost pool. (2 points) Using activity-based costing, do the following: d. Determine the total overhead that would be assigned to each product. (3 points) e. Compute the manufacturing overhead cost per one unit for each model. (2 points) f. Discuss at least two management decisions that would be impacted assuming the activity-based costing information provides more accurate costing than using the single rate as before. Mention specific products in your discussion. (4 points)