Activity Based Costing Maxey & Sons manufactures two types of storage cabinets-Type A and Type 8 and applies manufacturing overhead to all units at the rate of $160 per machine hour. Production Information follows. Type A 32.000 Type B 60,000 Anticipated volume (units) Direct-naterial cost per unit Direct-labor cost per unit The controller, who is studying the use of activity based costing, has determined that the firm's overhead can be identified with three activities: manufacturing setups, machine processing, and product shipping. Data on the number of setups, machine hours, and outgoing shipments, which are the activities' three respective cost drivers, follow. Type A Total Type B 140 90,000 Setups Machine hours Outgoing shipments 320 64,000 zee 150 154,000 350 The firm's total overhead of $24,640,000 is subdivided as follows: manufacturing setups $5,376,000; machine processing, $12,784,000; and product shipping, $4,480,000. Required: 1. Compute the unit manufacturing cost of Type A and Type B storage cabinets by using the company's current overhead costing procedures 2. Compute the unit manufacturing cost of Type A and Type B storage cabinets by using activity-based costing 3.15 the cost of the Type A storage cabinet overstated or understated (le, distorted by the use of machine hours to allocate total manufacturing overhead to production? By how much? 4. Assume that the current selling price of a Type A storage cabinet is $185.00 and the marketing manager is contemplating a $50 discount to stimulate volume. Is this discount advisable? o ri e arch 3