PROBLEM 3-12A Contrasting ABC and Conventional Product Costs [LO3-2, LO3-3, LO3-4] Precision Manufacturing Inc. (PMI) makes two types of industrial component partsthe EX300 and the TX500. It annually produces 60,000 units of EX300 and 12,500 units of TX500. The company's conven- tional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company's two product lines is shown below: Direct materials Direct labor.... EX300 $366,325 $120,000 TX500 Total $162,550 $528,875 $42,500 $162,500 The company is considering implementing an activity-based costing system that distributes all of its manu- facturing overhead to four activities as shown below: Activity TX500 EX300 Total 90,000 Activity Cost Pool ( and Activity Measure) Machining (machine-hours) Setups (setup hours) ..... Product-level (number of products).. General factory (direct labor dollars) Total manufacturing overhead cost. Manufacturing Overhead $198,250 150,000 100,250 60,125 $508,625 75 1 $120,000 62,500 300 1 $42,500 152,500 375 2 $162,500 152 Chapter 3 Required: 1. Compute the plantwide overhead rate that would be used in the company's conventional cost system. Using the plantwide rate, compute the unit product cost for each product. 2. Compute the activity rate for each activity cost pool. Using the activity rates, compute the unit product cost for each product. 3. Why do the conventional and activity-based cost assignments differ from one another