Can you please include step-by-step solutions?

Fayola Flange Company manufactures a variety of special anges for numerous customers. Annual capacity-related (manufacturing overhead) costs are $4,000,000 and the practical capacity level of machine hours is 200,000. The company uses planned machine hours as the cost driver in determining the plantwide cost driver rate. Until last year, the company used approximately 80,000 machine hours per year. Last year, competition increased and demand for the company's anges fell. In the face of continuing competition, the company estimates that it will use 62,500 machine hours in the coming year. The company sets its prices at 160% of production cost per unit. Requirements (a) What is likely to happen if demand decreases further and Fayola Flange continues to recompute its cost driver rate using the same approach? (h) Advise the company on choosing a cost driver quantity for computing cost driver rates and explain why you advocate your choice of quantity. Requirement (a) What is likely to happen if demand decreases further and Fayola Flange continues to recompute its cost driver rate using the same approach? Using the company's approach, the cost driver rate before the decrease in demand was $ per machine hour. With the drop in demand, the cost driver rate will be $ per machine hour. The company will consequently i its prices because the products will have a V reported cost. This may contribute to further V in demand, leading the company into V Lower/rasie Higer/Lower Decrease/increase a downward spiral Requlrement (b) Advise the company on choosing a cost driver quantity for computing cost driver rates and explain why you advocate your choice of quantity.a need tor additional capacity excessive profits Fayola Flange should use the V quantity of machine hours to determine the cost driver rate in order to avoid the uctuations described in part a. Actual/planned/practical capacity