For many years, Thomson Company manufactured a single product called LED 40. Then three years ago, the company automated a portion of its plant and at the same time introduced a seoond product called LED 90 that has become increasingly popular. The LED 90 is a more complex product, requiring 0.00 hours of direct labour time per unit to manufacture and extensive machining in the automated portion of the plant. The LED 40 requires only 0.40 hours of direct labour time per unit and only a small amount of machining. Manufacturing overhead costs are currently assigned to products on the basis of direct labour hours. Despite the growing popularity of the company's new LED 00. prots have been declining steadily. Management is beginning to believe that there may be a problem with the company's oosting system. Direct material and direct labour costs per unit are as follows: LEGd- LEBQJ Direct materials $30 $50 Direct labour {0.4 hours and 0.3 hours @ $15 per $6 $12 hou Management estimates that the company will incur $011000 in manufacturing overhead oosts during the current year and 60,000 units of the LED 40 and 20,000 units of the LED 00 will be produced and sold. Required: [a] |Dompute the predetermined manufacturing overhead rate assuming that the company continues to apply manufacturing overhead oost on the basis of direct labour hours hours. {2 mar'lrs} [b] Use the rate obtained in {a} to determine the unit product cost of each product. (2 marks] to] Management is considering using activity-based costing to assign manufacturing overhead cost to products. The activity-based costing system would have the following four activity cost pools: Expected and actual activity Activity Measure LEC40 LEC90 Number of part types 600 900 Number of purchase orders 2 000 800 Number of tests run 500 1 750 Machine hours 1 600 8 400 Activity cost pool Activity measure Estimated overhead costs Maintaining parts Number of part types $225 000 inventory Processing purchase Number of purchase $182 000 orders orders Quality control Number of tests run $45 000 Machine related Machine hours $460 000 Using activity based costing compute the unit product cost of each product. (5 marks) (d) Discuss the reasons that may account for the company's declining profits. What actions should Thompson Company take