[Question 3 [15 Marks] Rehm Company manufactures a product that is available in both a deluxe model and a regular model. The company has manufactured the regular model for years. The deluxe model was introduced several years ago to tap a new segment of the market. Since introduction of the deluxe model, while sales of the deluxe model have been increasing rapidly, the company's prots have been declining. Manufacturing overhead is assigned to products on the basis of direct labour~hours. For the current year, the company has estimated that it will incur $6,000,000 in manufacturing overhead cost and produce 15,000 units of the deluxe model and 120,000 units of the regular model. The deluxe model requires 1.6 hours ofdirect labour time per unit, and the regular model requires 0.8 hours. Material and labour costs per unit are as follows: Model Deluxe Regular Direct materials $154 $112 Direct labour 3? 16 $3 Required: a) (4 marks) Using direct labourhours as the base for assigning manufacturing overhead cost to products, compute the predetermined overhead rate. Using this rate and other data from the problem, determine the unit product cost of each model. b) (4 marks) Management is considering using activitybased costing to apply manufacturing overhead costs to products for external nancial reports. The activitybased costing system would have the following four activity cost pools: Estimated Activity Cost Pool Activity Measure Overhead Costs Purchase orders Number of purchase orders $252,000 Scrapi'rework orders Number of scrapfrework orders 648,000 Product testing Number of tests 1,350,000 Machine related Machinehours 3,250,000 Expected Activity Activity Measure Deluxe Regular Total Number or purchase orders 400 800 1,200 Number of scrapfrework orders 500 400 900 Number of tests 6,000 9,000 15,000 Machinehours 20,000 30,000 50,000