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- > Requirements 1. Use the company's current costing system to find the total cost of producing all Medium TVs and the total cost of producing all Large TVs. What was the average cost of making each unit of each model? Round your answers to the nearest cent. 2. Use ABC to find the total cost of producing all Medium TVs and the total cost of producing all Large TVs. What was the average cost of making each unit of each model? Round your answers to the nearest cent. 3. How much cost distortion was occurring between Rhodes's two products? Calculate the cost distortion in total and on a per unit basis. Could the cost distortion explain the CEO's confusion about pricing competition? Explain. Rhodes Inc. manufactures only two products, Medium (42-inch) and Large (63-inch) plasma screen TVs. To generate adequate profit and cover its expenses throughout the value chain, Rhodes prices its TVs at 200% of manufacturing cost. The company is concerned because the Large model is facing severe pricing competition, whereas the Medium model is the low-price leader in the market. The CEO questions whether the cost numbers generated by the accounting system are correct. He has just learned about ABC and wants to reanalyze this past year's product costs using an ABC system. Information about the company's products this past year follows: E (Click the icon to view the data.) Currently, the company applies manufacturing overhead on the basis of direct labour hours. The company incurred $864,400 of MOH this year and 25,000 direct labour hours (9,200 direct labour hours making Medium TVs and 15,800 making Large TVs). The ABC team identified three primary production activities that generate MOH costs: E: (Click the icon to view the production activities.) Requirements Data Production activities The company's manufacturing overhead numbers are as follows: Medium (42-inch) Plasma TVs: Total direct material cost: $661,000 Total direct labour cost: $222,000 Production volume: 3,100 units Large (63-inch) Plasma TVs: Total direct material cost: $1,270,000 Total direct labour cost: $388,000 Production volume: 3,700 units Materials Handling ($134,200); driven by number of material orders handled Machine Processing ($633,600); driven by machine hours Packaging ($96,600); driven by packaging hours The company's only two products required the following activity levels during the year Material Orders Machine Packaging Handled Hours Hours Medium 350 24,000 4,800 Large 200 24,000 6,700