Example: Assume a company that introduced new product to the market. Since the introduction of the new product the company notices that there is a decrease in the company profit and increase in demand on the new product, can you explain to the company the reason for these decrease in profits and increase in sales given the following data: D. Material Cost/Unit D. Labor Cost/Unit No. of units produced D. Labor hours/unit Old Product $112 8 120,000 0.8 New Product $154 16 15,000 1.6 Currently the company is using direct labor hours for charging the overhead costs to the products. Total overhead budget $6,000,000. The company is using the pricing model cost plus 30% of total cost. In addition assume that you are given the following data about the activities of the company and the needs of the two products from these activities:- Activity Budget Machine setup $648,000 Purchase orders $252,000 Quality Test Machine related $135,000 $3,750,000 $6,000,000 Activity Size 900 setups 1,200 orders 15,000 tests 50,000 hours Needs of O 400 setups 700 orders 9,000 tests 27,800 hours 500 Needs of N setups 500 orders 6,000 tests 22,200 hours Solution