ABC Inc. installed an activity based costing system several years ago. The company manufactures one product in a single facility and has identified five major activity centers relating to the manufacturing overhead. Activity Centre Labour related Cost driver Estimated Overhead Expected Activity Direct labour hours $560,000 40,000 DLH Purchase orders Number of orders $96,000 1,200 orders Product testing Number of tests $210,000 3,500 tests Template etching Number of templates $630,000 10,500 templates General factory Machine hours $1,620,000 90,000 machine hours Each unit requires 4 kilograms of direct material at $75.00 per kilogram and 60 hours of direct labour at $20.00 per hour. Each unit also requires the following activities: 2 purchase orders 1 test 15 templates 45 machine hours Required: 1. Compute the overhead rate for each activity center. (5 marks) 2. Compute the product cost per unit using activity-based costing. What would be the selling price if the company charged a 40% markup on cost? (7 marks) 3. How would the product cost and the selling price compare to the results obtained in part (2), if the company had used Estimated machine hours as the cost driver? (6 marks) 4. Briefly, explain why activity-based costing is better than using one activity driver such as machine hours for the whole plant. (2 marks)