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ABC VS. Traditional Costing The MLC Corporation is applying manufacturing overhead to its product on the basis of machine hours. The machine hour rate for the current accounting period is $100 per hour. The company has two products, Deluxe and Standard, require the same direct labor ($65), but differing in amounts of direct materials ($75 and $40, respectively). The company is anticipating to produce 5,000 units of Deluxe and 4.000 units of Standard. Tom Word, the company's controller, is considering the use of ABC for the firm. He determined that overhead can be identified with three major activities and has gathered the following data: ActivityNumber of setups Cost 60,000 340,000 Cost Driver Production setups Machine processing Packing and shipping Number of machine hours Number of shipments $500,000 Estimated cost-driver data for the two products and the company as a whole are: Standaro 29 Total 40 5,000 125 Deluxe Number of setups Number of machine hours Number of shipments 3,000 2,000 95 (a) Compute the total cost per unit for Deluxe and Standard, assuming the use of machine hour as an application rate. (b) Compute activity-based drivers for production setups, machine processing, and packing and shipping. (c) Compute the total cost per unit for Deluxe and Standard, assuming the use of ABC. (d) How would Mr. Tom, likely to react, if the company marketing manager is suggesting a campaign to promote the sales of Standard for $162