7 Reynolds Inc. manufactures only two products, Medium (42-inch) and Large (63-inch) plasma screen TVs. To generate adequate profit and cover its expenses throughout the value chain, Reynolds prices its TVs at 200% of manufacturing cost. The company is concerned because the Large model is facing severe pricing competition, whereas the Medium model is the low-price leader in the market. The CEO questions whether the cost numbers generated by the accounting system are correct. He has just learned about ABC and wants to reanalyze this past year's product costs using an ABC system. Information about the company's products this past year follows: (Click the icon to view the data.) Currently, the company applies manufacturing overhead on the basis of direct labour hours. The company incurred $979,720 of MOH this year and 25,300 direct labour hours (9,200 direct labour hours making Medium TVs and 16,100 making Large TVs). The ABC team identified three primary production activities that generate MOH costs: (Click the icon to view the production activities.) Requirements Requirement 1. Use the company's current costing system to find the total cost of producing all Medium TVs and the total cost of producing all Large TVs. What was the average cost of making each unit of each model? Round your answers to the nearest cent. Begin by identifying the formula to compute the current plantwide manufacturing overhead rate, and then compute the rate. (Round your answer to the nearest cent.) Total manufacturing overhead Total direct labour hours = Plantwide overhead rate Now use this rate to allocate the overhead to each model, and then calculate the average cost of making each unit of each model. (Round cost per unit to the nearest cent.) Manufacturing cost Medium Large Direct materials Direct labour Manufacturing overhead Total manufacturing cost Number of units produced Cost per unit Requirement 2. Use ABC to find the total cost of producing all Medium TVs and the total cost of producing all Large TVs. What was the average cost of making each unit of each model? Round your answers to the nearest cent. Begin by identifying the formula to compute the activity cost allocation rates, and then calculate the activity cost allocation rates. (Round your answers to the nearest cent.) Materials handling Machine processing Packaging (1) (2) Activity allocation rate /mat. orders handled = / machine hour packaging hour Now use these rates to allocate the overhead to each model, and then calculate the average cost of making each unit of each model. (Round interim answers to the nearest dollar and final answers to the nearest cent.) (Ctrl + ]) Manufacturing Cost Large Medium Direct materials Direct labour Manufacturing overhead Total manufacturing cost Number of units produced Cost per unit Requirement 3. How much cost distortion was occurring between Reynolds's two products? Calculate the cost distortion in total and on a per unit basis. Could the cost distortion explain the CEO's confusion about pricing competition? Explain. (Round interim and final answers to the nearest cent. Use parentheses or a minus sign for undercosted and negative cost distortion amounts.) Cost per unit using current system Medium Large Requirement 3. How much cost distortion was occurring between Reynolds's two products? Calculate the cost distortion in total and on a per unit basis. Could the cost distortion explain the CEO's confusion about pricing competition? Explain. (Round interim and final answers to the nearest cent. Use parenthes Print minus sign for undercosted and negative cost distortion amounts.) Cost per unit using current system Medium Large Cost per unit using ABC Overcosting/(Undercosting) Number of units Total cost distortion Could the cost distortion explain the CEO's confusion about pricing competition? Explain. (Round your answers to the nearest cent.) The Medium units had been (3) and the Large units had been (4) (6) for the Large units. 1: Data Medium (42-inch) Plasma TVs: Total direct material cost: $669,000 Total direct labour cost: $222,000 Production volume: 2,800 units Large (63-inch) Plasma TVs: Total direct material cost: $1,330,000 Total direct labour cost: $384,000 Production volume: 4,400 units 2: Production activities The company's manufacturing overhead numbers are as follows: Materials Handling ($172,720); driven by number of material orders handled Machine Processing ($710,400); driven by machine hours Packaging ($96,600); driven by packaging hours The company's only two products required the following activity levels during the year: Material Orders Machine Packaging Handled Hours Hours Medium 420 21,000 4,400 Large........ 260 27,000 6,100 Since Reynolds's sets its sales price at 200% of manufacturing cost, the resulting sales price should have been about $ (5) for the Medium units and about $