James, Inc., manufactures only two products, Medium (42-inch) and Large (63-inch) TVs To generate adequate profit and cover its expenses throughout the value chain, James prices its TVs at 300% of manufacturing cost. The company is concerned because the Large model is facing severe pricing competition, whereas the Medium model is the low-price leader in the market. The CEO questions whether the cost numbers generate by this past year's product costs using an ABC system. Information about the company's products this past year is as follows: Currently, the company applies manufacturing on the basis of direct hours. The company incurred $838,000 of manufacturing overhead this year. labor and 25, 500 direct hours (9, 500 direct labor and making Large TVs and 16,000 making large TVs). The ABC team identified three primary production activities that generate manufacturing overhead costs Materials Handling ($168,000); driven by number of material orders handled Machine Processing ($576,000); driven by machine hours Packaging ($94,000); driven by packaging hours The company's only two products required the following activity levels during the year: Requirements Use the company's current costing system to find the total cost of producing all Medium (42-inch) TVs and the total cost of producing all Large (63- Inch)TVs What was the average cost of making each unit of each model? Round the nearest cent Use ABC to find the total cost of producing all Medium(42-inch)TVs and the total cost of producing all Large (63-inch) TVs. What was the average cost of making each unit of each model? Round your answers to the nearest cent. How much cost distortion was occurring between the company's the two products? Calculate the cost distortion in total and on unit basis. Could the cost distortion explain the CEO's confusion about pricing competition? Explain