Etihad Corporation manufactures two products, Product S and Product W. Product W is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product W. Product W is the more complex of the two products, requiring one hour of direct labour time per unit to manufacture compared to one-half hour of direct labour time for Product S. Product W is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct-labour-hours. The company estimated it would incur $500,000 in manufacturing overhead costs and produce 10,000 units of Product W and 60,000 units of Product S during the current year. Unit cost for materials and direct labour are: Direct material Direct labour Product S Product W $ 10 $ 24 8 12 Required (show your calculations): a. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year. (5 marks) b. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: Activity Cost Pool Machine setups required Purchase orders issued Machine-hours required Maintenance requests issued Total Cost Product S $ 200,000 800 43,500 500 104,000 152,500 $ 500,000 3,000 860 Total Activity Product W 1,200 100 10,000 1,140 Total 2,000 600 13,000 2,000 Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year. (12 marks) c. Explain why the unit product cost is likely to differ between the traditional costing approach and activity-based costing approach. Etihad Corporation manufactures two products, Product S and Product W. Product W is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product W. Product W is the more complex of the two products, requiring one hour of direct labour time per unit to manufacture compared to one-half hour of direct labour time for Product S. Product W is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct-labour-hours. The company estimated it would incur $500,000 in manufacturing overhead costs and produce 10,000 units of Product W and 60,000 units of Product S during the current year. Unit cost for materials and direct labour are: Direct material Direct labour Product S Product W $ 10 $ 24 8 12 Required (show your calculations): a. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year. (5 marks) b. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: Activity Cost Pool Machine setups required Purchase orders issued Machine-hours required Maintenance requests issued Total Cost Product S $ 200,000 800 43,500 500 104,000 152,500 $ 500,000 3,000 860 Total Activity Product W 1,200 100 10,000 1,140 Total 2,000 600 13,000 2,000 Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year. (12 marks) c. Explain why the unit product cost is likely to differ between the traditional costing approach and activity-based costing approach.