Problem 5-47 Budgeted volume (units)..... Direct-material cost. Direct-labour cost... Deluxe Executive 16,000 30,000 $40 $65 25 25 The controller, who is studying the use of activity-based costing, has determined that the firm's verhead can be identified with three activities: manufacturing setups, machine processing, and product hipping. Data on the number of setups, machine hours, and outgoing shipments, which are the activi- ies' three respective cost drivers, follow. Setups. Machine hours... Outgoing shipments.. Deluxe Executive Total 100 32,000 200 60 160 45,000 77,000 150 350 The firm's total overhead of $6,160,000 is subdivided as follows: manufacturing setups, $1,344,000; nachine processing, $3,696,000; and product shipping, $1,120,000. Required: Overheads: $80 per machine hour Compute the unit manufacturing cost of Deluxe and Executive filing cabinets by using the com- pany's current overhead costing procedures. !. Compute the unit manufacturing cost of Deluxe and Executive filing cabinets by using activity- based costing. 3. Is the cost of the Deluxe filing cabinet overstated or understated (i.e., distorted) by the use of ma- chine hours to allocate total manufacturing overhead to production? By how much? 1. Calculate the aggregate amount by which the Deluxe cabinet line is undercosted by the company's current traditional overhead costing procedures. Then calculate the aggregate amount by which the traditional system overcosts the Executive cabinet line. . Assume that the current selling price of a Deluxe filing cabinet is $270 and the marketing manager is contemplating a $30 discount to stimulate volume. Is this discount advisable? Briefly discuss.