After her meeting with Cole, Brenda requested an investigation of the production costs and comparative efficiency. She received approval to hire a consulting firm to make an independent investigation. After a three-month assessment, the consulting firm provided the following information on the plant's production activities and costs associated with the two products: runs Part #433 Part # 582 Production 480,000 units 90,000 units Selling Price $ 32.45 $28.00 Overhead per umit* $ 13.96 $ 6.28 Prime cost per unit $ 8.62 $ 6.38 Number of production runs 105 210 runs Receiving orders 600 orders 1,000 orders Machine hours 130.000 machine hours 70,000 machine hours Direct labor hours 240,000 direct labor hour 20,250 direct labor hours Engineering hours 5,000 engineering hour 5,000 engineering hours Material moves 500 moves 400 moves *Calculated using a plant wide rate based on direct labor hours. This is the current way of assigning the plant's overhead to its products. The consulting firm recommended switching the overhead assignment to an activity-based approach, It maintained that activity-based cost assignment is more accurate and will provide better information for decision making. To facilitate this recommendation, it grouped the plant's activities into homogeneous sets with the following costs: $ 275,000.00 Overhead Setup costs Machine costs Receiving costs Engineering costs Materials-handling costs Total $ 2,005,000.00 $ 2,035,000.00 $ 2,050,000.00 $ 900,000.00 $ 7,265,000.00 3. Poes it make sense for the company to switch focus from the high-volume product to the low- Volume product? Why? Is Brenda's concern about competitors selling below the cost of making Part #433 a valid concern? Explain. TEXT BOX ENTRY 4. Explain the apparent lack of competition for Part #582. Comment also on the willingness of customers to accept a 25 percent increase in price for Part #582. TEXT BOX ENTRY 5. Assume that you are the manager of the plant. Describe what actions you would take based on the information provided by the activity-based unit costs. TEXT BOX ENTRY