Lottie Ltd. manufactures air conditioning units. There are three models: Entry, Mid\ and Prestige. Each model, because of its quality and price points, is aimed at\ different target markets.\ At present overheads are assigned to products using a plant-wide overhead\ allocation rate, on a labour hours basis. As a general rule price is based on cost plus\ 20%. The following information is provided:\ Entry Mid Prestige\ Material cost per unit 50 125 210\ Direct labour hours (per unit) (1)/(2) 1 1\ Machine hours 2 3 4\ Budgeted production and sales (units) 20,000 1,000 10,000\ Budgeted overheads for the year amount to 8,820,000. Direct labour cost is 8 per\ hour.\ The business is facing increasing competition, especially from imported products.\ Activity based costing has been suggested as a means to improve firm performance.\ The overheads have been analysed and it has been found that there are three main\ activities: machining (5,560,000), logistics (1,180,000) and after sales (2,080,000).\ It has been agreed that these overhead costs could be allocated to products using the\ following cost drivers: machine hours (for machining activity), number of deliveries to\ customers for logistics activity) and number of after sales repairs (for after sales\ activity). The finished products are delivered to customers (electrical retailers) in\ delivery batches as follows: