Gamma Inc. manufactures two products, Standard and Deluxe, and applies overhead on the basis of direct labor hours. Anticipated overhead and direct labor time for the upcoming accounting period are $900,000 and 30,000 hours, respectively. Information about the company's products follows. Gamma Inc.'s overhead of $900,000 can be identified with three major activities: order processing ($200,000), machine processing ($580,000) and product inspection ($120,000). These activities are driven by number of orders processed, machine hour worked, and inspection hours, respectively. Data relevant to these activities follow. Orders Processed Machine Hours Worked Inspection Hours Top management is very concerned about declining profitability despite a healthy increase in sales volume. The decrease in income is especially puzzling because the company recently undertook a massive plant renovation during which new, highly automated machinery was installed - machinery that was expected to produce significant operating efficiencies. Required: 1. Assuming use of direct labor hours to apply overhead to production, compute the unit manufacturing cost of the Standard and Deluxe products if the expected manufacturing volume is attained. ( 5 points) 2. Assuming use of activity-based costing, compute the unit manufacturing costs of the Standard and Deluxe products if the expected manufacturing volume is attained. (10 points) 3. Gamma Inc.'s selling prices are based heavily on costs. By using direct labor hours as an application base, which product is overcosted and which product is under-costed? (5 points)