II. Tustin ak e Trust operates in a very competitive marketplace, using a traditional system to determine the cost of processing its mortgage loans. Recently, the firm explored a switch to activity-based costing to determine the wisdom of its previous ways. The following information is available: Activity Cost $900,000 Application processing Loan underwriting 800,000 Loan closure 880,000 Total $2,580,000 Additional data shows the following usage of the activities during the year: 4,000 applications, 16,000 underwriting hours, and 8,000 legal hours (for loan closure). Two loan applications, among many others, were originated and closed during the year. No. 7439 consumed 3.5 hours in loan underwriting and 1.5 hours in loan closure, for a total of 5.0 hours. No. 7809 also required 5.0 hours of time, subdivided as follows: 2.0 hours in loan underwriting and 3.0 hours in loan closure. Required: A. Use an activity-based-costing system and determine the cost of processing underwriting, and closing the two loan applications. B. Determine the cost of processing the two loans if Tustin uses the traditional labor- hour-based system. Conversations with management found that, on average, each application took nine labor hours of processing time, excluding underwriting and clos ure. C. Is Tustin making a mistake by continuing to use a traditional system that is based on an average labor cost per hour? Why