Q.7 Star Industrial Corporation makes two products. Model X100 Model X200. Model X200 offers advanced features and is sold for a higher price than Model X100. Management expects to sell 50,000 units of Model X100 and 5,000 units of Model X200 next year. The company's total manufacturing overhead for the year is expected to be Rs. 1,920,000. A unit of Model X100 requires 0.2 direct-labor hours and a unit of Model X200 requires 0.4 direct labor-hours. Required: 1. The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If this method is followed, how much overhead cost would be applied to each product in total and per unit? 2. Management is considering an activity based costing system and would like to know what impact this would have on product costs. Preliminary analysis suggests that under activity based costing, a total of Rs. 1,340,000 in manufacturing overhead cost would be assigned to Model X100 and a total of Rs. 390,000 would be assigned to Model X200. In addition a total of Rs. 160,000 in non-manufacturing overhead would be applied to Model X100 and a total of Rs. 110,000 would be applied to Model X200. If this method is used how much overhead cost would be applied to each product in total and per unit? 3. Explain the impact of switching from the traditional costing system based on direct labor-hours to the activity based costing system on total and per unit overhead costs assigned to the two products.