Kitchen King's Toledo plant manufactures three product lines, all multi$-$burner, ceramic cook tops. The plant's three product models are the Regular $($REG$),$ the Advanced $($ADV$),$ and the Gourmet $($GMT$).$ Until recently, the plant used a job$-$ order product costing system, with manufacturing overhead applied on the basis of direct$-$labor hours. The following table displays the basic data upon which the traditional costing system was based,Planned annual production:Volume in unitsProduction runsDirect materalDirect labor $($not includingsetup$)$Machine hours $(11)$ per productunitTotal PH consumed by productline per yearREGADV$5,0004,0001,000403129$runt$125$ units$40$ runs$100$ units$ $15120$ runsse units$$203(9$ hours$$19$ per$ $171$ hour$)(11$ hears$$19$ per$ $299$heur$)(13$ hours$$19$ per$ $247$hear$)10$ MH$12117$ PM$50,000(105,000)45,000(12)$ m $^5*4\mathrm{.}617,000(17$ PM x $1,000)$The annual budgeted overhead is $$1,224,000,$ and the company's predetermined overhead rate is $$12$ per direct$-$labor hour. The product costs for the three product models, as reported under the plant's traditional costing system, are shown in the following table.REGADVDirect material$5129\mathrm{.}001151\mathrm{.}00$$ $203\mathrm{.}00$Direct labor $($mat including setup$)$Manufacturing everheadTotal$171\mathrm{.}00(3$ hour$319)100\mathrm{.}00$ $$400\mathrm{.}00$C$\_\{1\}$ hour$$12)209\mathrm{.}00(11$ hour $$19)137\mathrm{.}00(11$ hour @ $$12)$$ $492\mathrm{.}00$GIT$247\mathrm{.}00(13$ hour $$19)156\mathrm{.}00(13$ hour$$12)1606\mathrm{.}00$Kitchen King's pricing policy is to set a target price for each product equal to $130$ percent of the full product cost. Due to price competition from other appliance manufacturers, REG units were selling at $$525,$ and ADV units were selling for $$628.$ These prices were somewhat below the firm's target prices. However, these results were partially offset by greater$-$ than$-$expected profits on the GMT product line. Management had raised the price on the GMT model to $BOO, which was higher than the original target price. Even at this price, Kitchen King's customers did not seem to hesitate to place orders, Moreover, the company's competitors did not mount a challenge in the market for the GMT product line. Nevertheless, concem continued to mount in Toledo about the difficulty in the REG and ADV markets. After all, these were the plant's bread$-$and$-$butter products, with projected annual sales of $5,000$ REG units and $4,000$ ADV unitsKitchen King's director of cost management, Angela Ramirez, had been thinking for some time about a refinement in the Toledo plant's product$-$costing system. Ramirez wondered if the traditional, volume$-$based system was providing management with accurate data about product costs. She had read about activity$-$based costing, and wondered if ABC would be an improvement to the plant's product$-$costing system. After some discussion, an ABC proposal was made to the company's top management, and approval was obtained. The data collected for the new ABC system is displayed in the following table.