PROBLEM I The Canadian Motorcycle Company (CMC) produces two models of motorcycles: Faster and Slower. The company has five categories of overhead costs: purchasing, receiving, machine operating costs, handling, and shipping. Each category represents the following percentages of total overhead costs, which amount to $4 million: Purchasing (# purchases) Receiving (#shipments received) 25.0% Handling (#moves) 10.0% 12.5% Shipping (#km to ship) 15.0% Machine operating (#machine hrs) 37.5% Current capacity is 200,000 machine hours, and the current production uses 100% of the available hours. Currently, the overhead costs are applied to each model based on machine hours. The production costs for each model of motorcycle and other relevant information are as follows: Faster Slower Direct materials per unit Direct labour per unit $8,000 $6,500 $1,750 $1,850 Applied overhead ? ? Number of units produced 400 500 Number of purchases 5 4 Number of shipments received 3 3 Percentage of machine hours consumed by each product 50% 50% Number of moves in handling 75 100 Number of kilometres to ship to customers 4,000 4,250