Five: (16 marks) Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers: the deluxe and the regular. At the beginning of the year, the following data were prepared for this plant: Quantity Selling price Unit prime cost Unit overhead cost Deluxe Regular 100,000 800,000 $900.00 $750.00 $529.00 $482.75 $47.00 $117.25 Overhead is applied using direct labor hours. Upon examining the data, the vice president of marketing was particularly impressed with the per-unit profitability of the deluxe printer and suggested that more emphasis be placed on producing and selling this product. The plant manager objected to this strategy, arguing that the cost of the deluxe printer was understated. He argued that overhead costs could be assigned more accurately by using activity drivers --- factors that reflected each products' demands for overhead activities. To convince higher management that overhead rates using activity drivers could produce a significant difference in product costs, he obtained the following projected information from the controller for the production output given: Pool Name Activity Driver Pool Rate Setups Number of setups $3000 Deluxe 300 Regular 200 Machining Machine hours 200 100,000 300,000 Engineering Enginnering hours 40 50,000 100,000 Packing Packing orders 20 100,000 400,000 Providing space Machine hours 1 200,000 800,000 Pools are named according to the nature of the activities found within each pool. Providing space is a collection of facility-level activities. Packing and setups are collections of batch-level activities. Engineering is a collection of product-level activities, and machining is a collection of unit-level activities. Pool rate is cost per unit of activity driver. Required: a) Using the projected data based on functional-based costing, compare gross profit percentage (gross profit as a percentage of sales) and gross profit per unit for each product. (4 marks) b) Using the pool rates, compute the overhead cost per unit for each product. Using this new unit cost, compute gross profit percentage and gross profit per unit for each product. (6 marks) c) In view of the outcome in requirement 2, compare and discuss the results from requirement 1 and 2. Explain the reason for the different results from requirement 1 and 2. Evaluate the suggestion of the vice president of marketing to switch the emphasis to the deluxe model. (6 marks)