Cabigas Company manufactures two products, Product C and Product D. The company estimated it would incur $ 170,000 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labor-hours. Data concerning the current period's operations appear below:

	Product C	Product D
Estimated volume	2,000	4,000
Direct labor-hours per unit	2.00 hours	1.0 hours
Direct materials per unit	$21.00	$24.50
Direct labor cost per unit	$25.00	$15.00

Required:

a. Compute the predetermined overhead rate under the current method, and determine the unit product cost of each product for the current year.

b. The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labor-hours. The activity based costing system would use three activity cost pools. Data relating to these activities for the current period are given below:

Activies	Est. overhead costs	Expected Activity
		Product C	Product D	Total
Machine setup	$15,000	180	110	290
Purchase order	$87,000	1,200	550	1,750
General Factory (labor hours)	$68,000	4,000	1,800	5,800
Total	$170,000

Determine the unit product cost of each product for the current period using the activity-based costing approach.

c. Write an explanation of why overhead manufacturing costs shift from one product to another using the ABC system (two sentences).