Maxey & Sons manufactures two types of storage cabinets$-$Type A and Type B$-$and applies manufacturing overhead to all units at the rate of $$120$ per machine hour. Production information follows.

$\backslash$table$[[$Descriptions$,$Type A$,$Type B$],[$Anticipated volume $($units$),24,000,45,000],[$Direct$-$material cost per unit,$$28,$$ $42],[$Direct$-$labor cost per unit,$33,33]]$

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

$\backslash$table$[[,$Type A$,$Type B$,$Total$],[$Setups$,140,100,240],[$Machine hours,$48,000,67,500,115,500],[$Outgoing shipments,$200,150,350]]$

The firm's total overhead of $$13,860,000$ is subdivided as follows: manufacturing setups, $$3,024,000$; machine processing. $$8,316,000$; and product shipping, $$2,520,000.$

Required:

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

Compute the unit manufacturing cost of Type A and Type B storage cabinets by using activity$-$based costing.

Is the cost of the Type A storage cabinet overstated or understated $($i$.$e$.,$ distorted$)$ by the use of machine hours to allocate total manufacturing overhead to production? By how much?

Assume that the current selling price of a Type A storage cabinet is $$360\mathrm{.}00$ and the marketing manager is contemplating a $$40$ discount to stimulate volume. Is this discount advisable?

Answer is complete but not entirely correct.

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Compute the unit manufacturing cost of Type A and Type B storage cabinets by using activity$-$based costing.

Note: Round activity based application rates, overhead application and the final answers to $2$ decimal places.

$\backslash$table$[[,,$pe A$,$T$$pe B$],[$Unit manufacturing costs,$$,341\mathrm{.}50ox$$$,169\mathrm{.}00x$