Part $1$: Klein Company produces three types of bird feeders: Basic, Squirrel$-$Proof, and Deluxe.

Currently, the company allocates overhead to products using machine hours. This year, the company produced the following:

$1000$ Basic models

$2000$ Squirrel$-$Proof models

$1800$ Deluxe models

Details for each product at the end of the current year are as follows:

Basic

Squirrel$-$Proof

Deluxe

Revenue

$$30,000$

$$110,000$

$$117,000$

Direct Materials

$$12,000$

$$50,000$

$$54,000$

Direct Labour

$$7,500$

$$19,000$

$$22,500$

Machine$-$hours per unit

$0\mathrm{.}3$ MH

$0\mathrm{.}5$ MH

$0\mathrm{.}4$ MH

The total overhead cost to be allocated to products is $$28,000.$

Calculate the profit per unit for each product after allocated overhead costs using machine hours.

Part $2$: Use the activity$-$based information below to calculate the cost of each unit of product using machine setups instead of machine hours.

Cost Driver

Cost

Basic

Squirrel$-$Proof

Deluxe

Number of Machine Setups

$$12,000$

$3$ Setups

$4$ Setups

$5$ Setups

Operating Machines

$$4,000$

$\mathrm{.}3$ MH

$\mathrm{.}5$ MH

$\mathrm{.}4$ MH

Number of Sales Orders Received

$$4,000$

$20$ Orders

$40$ Orders

$45$ Orders

Number of Units Shipped

$$8,000$

$1,000$ Units

$2,000$ Units

$1,800$ Units

Write a paper, no more than one page in length, that discusses the following:

What are your observations when you compare the results for each method?

Which do you think is more accurate and why?

Based on your results, would you recommend the firm change the level of production for any category and why