Problem 3: Volume and ABC allocations. A world-famous photographer of wild animals and nature, Sonja Rego sells framed prints of select photographs over the Internet. Regardless of the picture bought, she offers buyers a choice in framing: a plain black frame or a fancy frame with a certificate of authenticity. Based on initial cost estimates, Sonja believes the Deluxe frames to be more profitabie than the Standard frames. However, her profits have slipped every quarter even as the proportion of Deluxe frames soid has increased. She has asked for your help in figuring out what she might be doing wrong. She provides you with the following data: _ Standard 1.0mm $350 $210 Materials $100 $65 Labor $75 $50 She further informs you that her total overhead is $390,000 per year. A. What is the profit per unit for the Deluxe and Standard prints if Sonja allocates overhead using labor hours as the allocation basis? B. You find that only $156,000 of Sonja's cost relates directly to labor. Of the remainder, $136,500 corresponds to batch-level activities and $58,500 to product-level activities. She runs separate batches (50 prints for Deluxe, 250 for Standard) for Deluxe and Standard pictures. The product-level costs, she believes, are equally attributable to both product lines. The remaining facility- Ievel costs relate to the rent on her studio, hosting the Web site, and other such business-sustaining actions. Prepare an income statement for Sonja (including the profitability of each product and in total), cieariy highlighting the allocation from each cost pool. C. Based on your answers to parts A and B, what insights could you offer to Sonja