Question 2 (22 marks) A souvenir factory manufactures two souvenirs, Royal and Standard. Details of the production costs follow: Royal Standard Annual sales in units 7,000 10,000 Direct materials per unit $30 $20 Direct labor-hours per unit 5 6.5 Direct labor rate $15 per DLH Activities and Activity Measures Labor related direct labor-hours) Machine setups (setups) Production orders (orders) General factory (machine-hours) Estimated Overhead Cost $80,000 $150,000 $70,000 $260,000 Expected Activity Royal Standard Total ? ? ? 4,000 1,000 ? 200 200 ? 12,000 28,000 ? Required: a) Compute the predetermined overhead rate using the total estimated costs with labor hours as allocation base under the traditional approach and determine the unit product cost of each product. (7 marks) b) Suppose Activity Based Costing is used. Determine the activity rate for each of the four activity cost pools. (4 marks) c) Using the activity rates and other data from the question, determine the ABC unit cost of each product. (8 marks) d) Explain the reasons for the shift of costs after using Activity Based Costing by analyzing the data related to the expected activity of the products