Nasir Manufacturing produces two products in its Sharjah plant: Crystal and Glass. Since inception, Nasir has used only one manufacturing overhead pool to accumulate costs. Manufacturing overhead has been allocated to products based on direct labor hours. Until recently, Nasir was the sole producer of Glass and was able to dictate the selling price. However, last year Zayed Products began marketing a comparable product at a price below the standards costs developed by Nasir. Market share has declined rapidly, and Nasir must decide whether to meet the competitive price or to discontinue the product line. Recognizing that discontinuing the product line would place additional burden on its remaining product, Crystal. Nasir is planning to use the activity-based costing (ABC) to determine if it would show a different cost structure for the two products. The three major indirect costs for manufacturing the products are purchase orders, power usage and setup costs and handling materials. A decision was made to separate the manufacturing department costs into three activity centers: 1) Inspection using number of purchase orders as the cost driver, 2) Fabricating using machine hours as the cost driver and 3) Assembly using number of setups as the cost driver. The annual budget before separation of manufacturing overhead is shown below in the table: Total Cost Product line Crystal Class Number of units 25,000 40,000 Direct labor 3 hours/unit 2 hours/unit Number of direct labor hours 180,000 hours Total Direct Labor AED 720,000 Direct Material AED 4/unit AED 5/unit Manufacturing Overhead AED 900,000 The cost structure after separation of overhead into activity pools is shown below: Inspection Fabricating Assembly Direct Labor 25% 35% 40% Direct Material 20% 30% 50% Manufacturing overhead 30% 30% 40% The activity base rates for the products are shown below: Activity Base Crystal Glass Number of Purchase Orders 5,000 3,000 Machine hours per unit 5 1.875 Number of setups 2,000 1,000 Questions: A. By allocating the manufacturing overhead based on direct labor hours, calculate the: 1- Total manufacturing budgeted cost of the manufacturing department (2 marks) 2- Cost per unit for Crystal product (3 marks) 4/unit x 25,000 = 3- Cost per unit for Class product (3 marks ) 5/unit x 40,000 = B. After separation of manufacturing overhead into activity pools, compute the total manufacturing budgeted cost of the: 1- Inspection department (1 mark) 2- Fabricating department (1 mark) 3- Assembly department (1 mark) C. Using ABC system , calculate the cost per unit for: 1- Crystal (2.5 marks) 2- Glass (2.5 marks) D. Discuss how a decision by Nasir Manufacturing regarding the continued production of Crystal will be affected by the results of your calculations in requirement C. (2 marks) E. If Nasir decides to moves to mass production and focuses on one product (Glass) by using process costing system in highly automated process. Identify the five steps required of the production the cost report if Nasir uses weighted average method. (2 marks)