Macy & Sons manufactures two types of storage cabinetsType A and Type Band applies manufacturing overhead to all units at the rate of $124 per machine hour. Production information follows.

Type A Type B

Anticipated volume (units) 24,800 46,500

Direct-material cost per unit $30 $45

Direct-labor cost per unit 35 35

The director, 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, and outgoing shipments, which are the activities' three respective cost drivers, follow.

Type A Type B Total

Setups 144 104 248

Machine hours 49,600 69,750 119,350

Outgoing shipments 200 150 350

The firm's total overhead of $14,799,400 is subdivided as follows: manufacturing setups, $3,228,960; machine processing, $8,879,640; and product shipping, $2,690,800.

1.Compute the unit manufacturing cost of Type A and Type B storage cabinetsby using the company's current overhead costing procedures.

2.Compute the unit manufacturing cost of Type A and Type B storage cabinets by using activity-based costing. (Round activity based application rates, overhead application and the final answers to 2 decimal places.)

3.Is the cost of the Type Astorage cabinet overstated or understated (i.e., distorted) by the use of machine hours to allocate total manufacturing overhead to production? By how much? (Do not round intermediate calculations. Round activity based application rates, overhead application and the final answers to 2 decimal places.)

4.Assume that the current selling price of a Type A storage cabinet is $369.50 and the marketing manager is contemplating a $41 discount to stimulate volume. Is this discount advisable?