John Sticks - the new CEO found that the company was using a cost-plus pricing system adding a 50% mark up to the manufacturing costs of both the commercial and domestic sunshade stands to arrive at the sales price. The costing of the sunshade stands was based on the following information: Commercial Domestic Units produced and sold 1,000 10,000 Sales Price (Average) $27,750 $1,500 Total Per unit Total Per unit Direct Materials $6,000,000 $6,000 $2,000,000 $200 Direct Manufacturing Labour $2,000,000 $2,000 $1,500,000 $150 Machine Costs $2,000,000 $2,000 $1,000,000 $100 Total Direct Costs $10,000,000 $10,000 $4,500,000 $450 Manufacturing Overhead Costs $8,500,000 $8,500 55,500,000 $550 Total Cost of Goods Sold $18,500,000 $18,500 $10,000,000 $1,000 "Manufacturing overhead costs were allocated per machine hour, the commercial units used 1.7 machine hour per unit and the domestic used 6.6 (approx.) minutes per unit. John began his tenure at the company by closely examining the manufacturing process. The process required for making sunshade stands substantially differed between the domestic and commercial sunshade stands. In addition, sunshade stands for commercial use were manufactured in very small batches to assure uniform quality from one product to the next. On further investigation of the production process, John was able to identify the following activities and their related costs that were used in producing the two different products. Units of the Cost Allocation Base Activity Cost Total Activity Commercial Domestic Allocation Base Costs Soldering number of solder points $4,000,000 15.000 40,000 Shipments number of shipments S1,800,000 1,000 20 Quality control number of inspections $2,200,000 1.000 100 Purchase orders number of orders $1,400,000 1.000 50 Machine power machine hours $3,000,000 1,700 1.100 Machine setups number of setups $1,600,000 1,000 100 Total manufacturing overhead $14,000,000 John is trying to find a way to improve the outlook for the company and explain the problem and issues to the family members who have little knowledge of contemporary management accounting techniques