C8.45 Traditional versus simple activity-based costing, strategic cost analysis: manufacturer L0 8.1, 8.2, 8.51, 8.6 Morelli Electric Motor Corporation manufactures electric motors for commercial use. The company produces three models called standard, deluxe and heavy-duty. The company uses a job costing system with manufacturing overhead applied on the basis of direct labour hours. The system has been in place with little change for 25 years. Product costs and annual sales data are as follows: Standard model Deluxe model Heavy-duty model Annual sales (units) 20 000 1 000 10 000 Product costs: Raw material $ 10 $ 25 $ 42 Direct labour (0.5 hr @ $20) 20 (1 hr @ $20) 20 (1 hr @ $20) Manufacturing overhead* 85 170 170