Pressure Inc. manufactures two models of high-pressure steam valves, the XR7 model and the ZD5 model. Data regarding the two products follow: Direct Labor-Hours Product per Unit XR7 ........ 0.2 ZDS ....... 0.4 Total Direct Labor Hours Annual Production 20,000 units 40,000 units 4.000 16,000 20,000 Additional information about the company follows: a. Product XR7 requires $35 in direct materials per unit, and product ZD5 requires $25. b. The direct labor rate is $20 per hour. c. The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products. Manufacturing overhead totals $1,480,000 per year. d. Product XR7 is more complex to manufacture than product ZD5 and requires the use of a special milling machine. e. Because of the special work required in (d) above, the company is considering the use of activity-based costing to apply overhead cost to products. Three activity centers have been identified as follows: Expected Activity Estimated Cost Driver Overhead Activity Center Cost Driver Cost Total XR7 ZDS Machine setups ....... Number of setups $ 180,000 250 150 Special milling ........ Machine-hours 300,000 1,000 1,000 General factory ....... Direct labor-hours 1,000,000 20,000 4,000 16,000 $1,480,000 100 a) Calculate the "Traditional" Budgeted Broad single indirect cost rate below: b) Determine the cost to make one unit of XR7 and ZD5 using the traditional indirect cost rate in a). c) Can you identify any signs that there might be some problems with the costing of the products, that is that one product migfht be subsidizing the other producxts costs