New World Company produces ordinary and luxury products and operates at capacity. Data related to the two products are presented below: Annual production in units Direct material costs Direct manufacturing labor costs Direct manufacturing labor-hours Number of Setups Inspection hours Ordinary 100,000 $250,000 $300,000 15,000 600 4,000 Luxury 50,000 $350,000 $775,000 35,000 300 2,000 Manufacturing overhead costs are as follows: Assembly costs Setup costs Inspection costs Total Manufacturing overhead cost Cost Driver $900,000 Direct Labor-hours $270,000 Number of setups $180,000 Inspection hours $1,350,000 a. Allocate the manufacturing overhead costs to the cost objects (Ordinary and Luxury) based on simple costing system and using direct labor hours as a single cost allocation base. Compute the manufacturing cost per unit for each product (30 marks) b. Allocate the manufacturing overhead costs to the cost objects (Ordinary and Luxury) by implementing ABC (activity-based costing system). There are three ctivities: assembly, setup, and inspection Compute the manufacturing cost per unit for each product. (60 marks), c. Explain why New world company might favor the ABC system over simple costing system (10 points)