I need help with part D, I have solved all other parts don't know how to do part D

International Steel Company has budgeted manufacturing overhead costs of $2.5 million. It has allocated overhead on a plant-wide basis to its two products (Standard Steel and Deluxe Steel) using machine hours, which are estimated to be 100,000 for the current year. The company has decided to experiment with activity-based costing and has created five activity cost pools and related activity cost drivers as follows: Activity CentreCost DriverEstimated OverheadExpected ActivityMaterial handlingNumber of moves$250,00050,000 movesPurchase ordersNumber of orders$200,000 4,000 ordersProduct testingNumber of tests$450,000 9,000 testsMachine set-upNumber of set-ups$600,000 6,000 set-upsMachiningMachine hours$1,000,000100,000 machine hours

Each unit of the products requires the following:

Standard SteelDeluxe SteelDirect materials costs$200$250Direct labour costs$100$120Purchase orders 2 3Machine set-up 5 10Product testing 3 4Machining 50 50Materials handling 5 10

Instructions

(a)Under traditional product costing using machine hours, calculate the total manufacturing cost per unit of both products.

Deluxe Steel: $1,620

(b)Under ABC, prepare a schedule showing the calculation of the activity-based overhead rates (per cost driver).

Standard Steel: $1,275

(c)Calculate the total manufacturing cost per unit for both products under ABC.

Deluxe Steel: $2,270

(d)Write a memo to the president of the company discussing the implications of your analysis for the company's plans. In this memo, provide a brief description of ABC, as well as an explanation of how the traditional approach can result in distortions.

(a):

Predetermined overhead rate = 2,500,000/100,000 = $25

Standard

Deluxe

Direct material

$200

$250

Direct labour

100

120

Manufacturing overhead (25*50machine hours)

1,250

1,250

Total manufacturing cost per unit

$1,550

$1,620

(b):

Overhead rate for each activity:

Activity centre

Estimated MOH

Expected activity

Rate

Cost drivers

Material handling

$250,000

50,000

$5

Per move

Purchase orders

200,000

4,000

50

Per order

Product testing

450,000

9,000

50

Per test

Machine set up

600,000

6,000

100

Per setup

Machining

1,000,000

100,000

10

Per machine hour

$2,500,000

Activity usage for each product:

Usage

Activity center

Rate

Cost drivers

Standard steel

Deluxe steel

Material handling

$5

Per move

$5

$10

Purchase orders

50

Per order

2

3

Product testing

50

Per test

3

4

Machine set up

100

Per setup

5

10

Machining

10

Per machine hour

50

50

Usage

Activity center

Rate

Standard steel

Deluxe steel

Material handling

$5

$25

$50

Purchase orders

50

100

150

Product testing

50

150

200

Machine set up

100

500

1,000

Machining

10

500

500

$1,275

$1,900

(c):

Unit costs under ABC method:

Standard Steel

Deluxe Steel

Direct material

$200

$250

Direct labour

100

120

Manufacturing overhead

1,275

1,900

Total manufacturing cost per unit with ABC

$1,575

$2,270

Total cost per unit wit traditional method

$1,550

$1,620