Maxey & Sons manufactures two types of storage cabinets A and Band applies manufacturing overhead to all units at the rate of $84 per machine hour. Production information follows.

Descriptions	A	B
Anticipated volume (units)	16,800	31,500
Direct-material cost per unit	$ 10	$ 15
Direct-labor cost per unit	15	15

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.

Descriptions	A	B	Total
Setups	104	64	168
Machine hours	33,600	47,250	80,850
Outgoing shipments	200	150	350

The firm's total overhead of $6,791,400 is subdivided as follows: manufacturing setups, $1,481,760; machine processing, $4,074,840; and product shipping, $1,234,800.

Required:

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

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

3 Is the cost of the 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?

4 Assume that the current selling price of A storage cabinet is $242.50 and the marketing manager is contemplating a $31 discount to stimulate volume. Is this discount advisable?