JJ Corporation manufactures two types of travel bags basic model and deluxe modeland applies manufacturing overhead to all units at the rate of $80.00 per machine hour. Production information follows.

	Deluxe	Basic
Anticipated volume (units)	5,000	10,000
Direct material cost	$60	$40
Direct labor cost	25	25

The controller, who is studying the use of activity-based costing, has determined that the firm's overhead can be identified with three activities: manufacturing setups, machine processing, and product shipping. Data on the number of setups, machine hours worked, and outgoing shipments, the activities' three respective cost drivers, follow.

	Deluxe	Basic	Total
Setups	70	30	100
Machine hours worked	15,000	25,000	40,000
Outgoing shipments	90	110	200

The firm's total overhead of $3,060,000 is subdivided as follows: manufacturing setups, $260,000; machine processing, $2,400,000; and product shipping, $400,000.

Required:

1. Compute the application rates that would be used for manufacturing setups, machine processing, and product shipping in an activity-based costing system.
2. Assuming use of activity-based costing, compute the unit overhead costs of basic travel bag and deluxe travel bag if the expected manufacturing volume is attained.
3. Assuming use of activity-based costing, compute the total cost per unit of deluxe travel bags.
4. If the company's selling price is based heavily on cost, would a switch to activity-based costing from the current traditional system result in a price increase or decrease for the deluxe travel bag? Show computations.