(C) Fares Company produces two types of products (Alpha and Beta). The price of each product is determined based on the cost plus 10% profit. Production of the two products goes through two departments: The Cutting Department and the Assembly Department. The Company currently uses a simple allocation method for its manufacturing overhead costs that is based on direct labor hours. Budgeted overhead costs and hours for the coming year were as follows: Cutting Department Assembly Department Manufacturing overhead costs Machine hours Direct labor hours AED 500,000 100,000 hours 60,000 hours Total AED 220,000 AED 720,000 20,000 hours | Hrs. 120,000 100,000 hours Hrs. 160,000 Some customers have complained of the high prices that the Company charges for its products in comparison to its competitors. The controller had asked for a review of the costing method and pricing One manager suggested the use of departmental rates to overcome the problem of over/under costing of any of the two products. He gathered and provided the following information for a sample of two customers who have recently purchased the Company's products. Product Hours at the Cutting Department Hours at Assembly Department Customer 1 (Alpha) 5 units 600 machie hours100 labor hours 100 labor hours 50 machine hours Customer 2 (Beta) 10 units 50 labor hours 150 machine hours 550 labor hour 50 machine hours Required 1. Compute the manufacturing overhead cost allocated to a unit of each product using the simple allocation method (2 marks) Compute the manufacturing overhead cost allocation to a unit of each product using the departmental rates (2 marks) Assume that each unit of the two products cost AED 700 for direct material and direct labor, calculate the price charged to customers for a unit of each product under each of the two methods of allocation (3 marks) Based on your calculations above, which of the two customers do you think has complained about the prices? (1 mark) 2. 3. 4