1. A new cost accountant has suggested that the company implement an activity-based costing (ABC) system. After viewing the factorys manufacturing activities and costs, the cost accountant has gathered the following budgeted information:

Wans Rans

Units produced and sold	168,750	337,500
Direct labour hours used	337,500	1,012,500
Direct labour cost	3,375,000	15,187,500
Number of times handled	60,000	30,000
Number of parts	18,000	12,000
Number of design changes	3,000	1,500
Number of product setups	12,000	9,000

Additionally, the cost accountant has determined that the manufacturing overhead costs budgeted for 2021 were as follows:

Cost pool Activity Costs

Handling $10,125,000.00

Number of parts $8,100,000.00

Design changes $11,137,500.00

Setups

Using activity-based costing, complete the following:

1. 1. Select suitable cost allocation bases for each activity and compute the activity based costing allocation rates.
   2. Compute the total manufacturing cost for each product line.
   3. Compute the manufacturing cost per unit for each product line.
2. What evidence exists that there is product diversity and cost distortion in the simple costing system? Please discuss.