College Supply Company (CSC) makes three types of drinking glasses: short, medium and tall. It presently applies overhead using a predetermined overhead rate based on direct labor hours. A group of company employees recommended that CSC switch to activity-based costing and identified the following activities, cost drivers, estimated costs, and estimated cost driver units for year 5 for each activity center. Activity Recommended Cost Driver Estimated Cost Estimated Cost Driver Units # of production units $ 38,000 100 runs # of orders units 60,000 200 orders Pounds of materials 24,000 2,000 pounds Setting up production Processing orders Handling materials Using machines Providing quality management Packing & Shipping Machine hours 72,000 10,000 MH 60,000 40 Inspect. # of inspections Units shipped 48,000 20000 Units Total Estimated Costs $ 302,000 In addition, management estimated 2,000 direct labor hours for year 5. Assume that the following cost driver volumes occurred in February, year 5. Short Medium Tall Number of units produced 1,000 500 400 Direct materials costs $ 6.000 $ 3.750 $ 3,000 Direct labor hours 100 120 110 Number of orders 8 8 4 Number of production runs 2 4 8 Pounds of material 400 800 200 Machine hours 500 300 300 Number of inspections 2 2 2 Units shipped 1,000 500 300 Direct labor costs were $30 per hour. Required: 1. Compute the predetermined overhead rate for year 5 using direct labor hours as the allocation base. Compute the production costs for each product for February using direct labor hours as the allocation base and the predetermined rate as just computed. 2. Compute the predetermine rates for year 5 for each cost driver recommended by the employees. 3. Compute the production costs for each product for February using the cost drivers recommended by the employees and the predetermined rates calculated in 2. 4. Management has seen your numbers and wants an explanation for the discrepancy between the product costs using direct labor hours as the allocation base and the product costs using activity-based costing. Write a brief response