CEB currently uses a standard cost system, and the following data apply to the TV and PC boards: TV boards PC boards Direct materials $100 $160 Direct labour (hours) 1.7 4.2 Machine time (hours) 0.6 1.9 Direct labour cost is $16 per hour. Variable manufacturing support costs are applied on the basis of direct labour hours. This year's variable manufacturing support costs are budgeted at $2,240,000, and direct labour hours are estimated at 448,000. Other manufacturing support is applied at $12 per machine hour. CEB applies a materials handling charge (in other words, materials support costs) of 12% of direct materials cost; this materials handling charge is not included in variable manufacturing support costs. Ed Welch, CEB's management accountant, believes that before the management group proceeds with the discussion about allocating sales and promotional dollars to individual products, it may be worthwhile to look at these products on the basis of the activities involved in their production. He noticed that the company has been recently selling more of the high- end PC boards than their competitors, yet the prots were still falling. \"Using this information,\" Welch explained, \"we can calculate an activity-based cost for each TV board and each PC board and then compare it to the standard cost we have been using. The costs that remain the same for both cost methods are the costs of direct materials and direct labour. The cost drivers will replace all indirect costs.\