Part C Activity-Based Costing (30 marks) Siegel Company manufactures a product that is available in both a deluxe model and a regular model. The company has manufactured the regular model for years. The deluxe model was introduced several years ago to tap a new segment of the market. Since introduction of the deluxe model, the company's profits have steadily declined and management has become increasingly concerned about the accuracy of its costing system. Sales of the deluxe model have been increasing rapidly Manufacturing overhead is assigned to products on the basis of direct labor-hours. For the current year, the company has estimated that it will incur $900,000 in manufacturing overhead cost and produce 5,000 units of the deluxe model and 40,000 units of the regular model. The deluxe model requires two hours of direct labor time per unit, and the regular model requires one hour. Material and labor costs per unit are as follow Model Deluxe Regular Direct materials $40 $25 Direct Labor S14. $7 Required 1. Using direct labor-hours as the base for assigning overhead cost to products, compute the pre- determined overhead rate. Using this rate and other data from the problem, determine the unit product cost of each model 2. Management is considering using activity-based costing to apply manufacturing overhead cost to products for external financial reports. The activity-based costing system would have the following four activity cost pools: Activity Cost Pool Activity Measure Estimated Overhead Cost Purchasing Purchase orders issued $204,000 Processing Machine-hours $182,000 Scrap/rework Scrap/rework orders issued $379,000 Shipping Number of shipments 35,000 Expected Activity Activity Measure Deluxe Regular Tota. Purchase orders issued 200 400 600 Machine-hours......... 20,000 15,000 35,000 Scrap/rework orders issued 1,000 1,000 2,000 Number of shipments 250 650 900