Question 2 (13 marks) Siegel Corporation manufactures a product available in both a regular and a deluxe model. The company has made the regular model for years; the deluxe model was introduced several years ago to capture a new segment of the market. Since the introduction of the deluxe model, the company's profits have steadily declined, and management has become conc erned about the accuracy ofits costing system. Sales of the deluxe model ha ve been increas ing rapidly. Overhead is applied to products on the basis of direct labour hours. At the beginning of the current year, management estimated that $5,184,000 in overhead costs would be incurred for an estimated 48,000 direct labour hours. The deluxe model requires 3.2 hours of direct labour per unit, and the regular model requires 0.8 hours of direct labour per unit. Materials and labour costs per unit follow Deluxe Regular Direct materials cost per unit......... $150 Direct labour cost per hour ............14 $112 16 Required: 1. Compute the predetermined overhead rate using direct labour hours as the basis for allocating overhead costs to products. Compute the unit product cost for one unit of each model. (3 marks) 2. An intern suggested that the company should use activity-based costing to cost its products. A team was formed to investigate this idea, and it came back with the recommendation that four activity cost pools be used. These cost pools and their associated activities follow Activity cost pool and activity driver Estimated overhead costs Purchase orders (number oforders) Rework requests (number of requests) Product testing (number of tests) Machine related (machine hours) $476,800 562,400 908,000 3236,800 Activity level Deluxe Regular 1,184 1,200 810 ,440 5,000 6,350 15,240 25,220 Assume that the actual activity is as expected for the year. Using activity-based costing, compute the unit product cost for one unit of each model. (7 marks)