(Activity-Based Costing) The Milwaukee Company manufactures two models of scooters, deluxe and regular. The company has manufactured the regular model for years; the deluxe model was introduced recently to tap a new segment of the market. Although sales of the deluxe model have been increasing rapidly, the company's profits have steadily declined. Management has become increasingly concerned about the accuracy of its costing system. The current cost accounting system allocates manufacturing overhead costs to the two products on the basis of direct labor hours. For 2020, the company has estimated that it will incur $2,581,000 in manufacturing overhead costs and produce 20,000 units of the deluxe model and 500,000 units of the regular model. The deluxe model requires one hour of direct labor and the regular model requires hour. Direct labor costs $20 per DLH. The deluxe model requires 2 machine hours per unit and the regular model requires 0.5 machine hours per unit. Direct costs and selling prices per unit are as follows: Direct Material Selling Price Regular $8 $25 Deluxe $10 $60 The company is considering switching to an ABC system. A recent cost study revealed the following MOH related activities and costs: Activity Drivers # of purchase orders Activity Annual Cost Purchase Orders $246,000 Inspections $600,000 # of Inspections (per batch) Production Set-ups $710,000 Machine Maintenance $450,000 Setup Hours (per batch) Machine hours Facility Costs $575,000 # of units TOTAL $2,581,000 The company would like to allocated Machine Maintenance on a per machine hour basis; and facility level costs will be allocated on a per unit basis. The following information is related to activities: Activity Driver # of units per batch # of purchase orders Deluxe 80 units 200 p.o. Regular 1,000 units 200 p.o. # of Inspections per batch Setup time per batch 1 ins. per batch 0.5 hour per batch 1 ins. per batch Machine hours Facility costs 250,000 MH 1 hour per batch 40,000 MH 500,000 units 20,000 units Note: for consumption ratios, round percentages to two decimals. Activity Purchasing Inspections Production set-ups Activity Cost Activity drivers Regular Deluxe drivers drivers Consumption ratios $246,000 # of POS $600,000 # of Inspections $710,000 # of Setup Hours Machine Maintenance $450,000 # of Machine hours Facility Costs Total Costs $575,000 $2,581,000 # of units Requirements: 1. Assign total MOH cost for Regular Model using activity rates (show your work). 2. Assign total MOH cost for Deluxe Model using consumption ratios (show your work). 3. Determine the gross profit (per unit) of the Regular and Deluxe models using the ABC information. Standard Deluxe