5-36 ABC, overhead allocation in production. Yahama Ltd makes several spare parts for motorbikes including Suzuka and Yahama parts. The company has recently switched from the traditional absorption costing to the activity-based costing system. The following details relate to the manufacturing of the Suzuka and Yahama spare parts for the last accounting year: Suzuka Yahama Units produced 4,000 2,000 Purchase orders 400 500 Storage 200 250 Machine setups 50 20 Machine-hours 10,000 4,000 Direct materials 10,000 \ 8,000 Direct labor 30,000 40,000 Variable overheads 5,000 2,000 For all output manufactured by Yahama Ltd during the last financial year, the annual estimated production activity, cost pools, and cost driver activity levels are: Cost Pools Activity Level Purchases 100,000 2,000 Purchase orders Storage 90,000 1,000 Issue notes Machine setup \ 80,000 800 Setups Machine runs 150,000 30,000 Total machine-hours Total production overheads 420,000 1. Calculate the overhead rates using activity-based costing for purchases, storage, setups, and machine runs. 2. Calculate the unit costs for Suzuka and Yahama spare parts including the direct costs and allocated overheads. 3. Comment on the activities that have the highest cost driver rates and any alternatives for reducing such costs