Problem 4-12 Contrasting ABC and Conventional Product Cost [LO4-2, LO4-3, LO4-4] Precision Manufacturing Inc. (PMI) makes two types of industrial component parts-the EX300 and the TX500. It annually produces 60,000 units of EX300 and 12,500 units of TX500. The company's conventional 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 TX500 $162,550 $120,000 $ 42,500 Total $528,875 $162,500 The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to four activities as shown below: 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 Activity Manufacturing Overhead EX300 $198,250 90,000 TX500 62,500 Total 150,000 100,250 75 1 300 1 152,500 375 2 60,125 $120,000 $42,500 $162,500 $508,625