Question 3: ABC (20 marks) CW ic makes two stuffed toys-the bunnies and the faxes. A traditional income statement for the mod et period is shown below: CWB loc Statement Sales $ 1,701,300 Cost of goods sild 1,239,445 Gron morg SG&A expenses 463.855 580,000 Net operating income $ (116,145) CWB produced and sold 60.400 units of stuffed bunnies at a price of $20 per stand 12,700 unity of stuffed fones at a price of $39 per unit. The company's traditional cost system allocates manufacturing overhead to products using a plantwide overhicad rate and direct labor dollars as the allocation base. Additional information relating to the company's two product lines is shown below Manufacturing overhead Direct materiale Direct labor Cost of goods sold Bunnies Foxes 5 400,700 5 162,500 $ 120,000 5 42,600 Total 563,200 162,600 513.645 1,239,445 The company has created an activity-based costing system to evaluate the profitability of its products. The ABC implementation team concluded that $56,000 and $108,000 of the company's advertising expenses could be directly traced to stuffed bunnies and foxes, respectively. The remainder of the selling and administrative expenses was organization- sustaining in nature. The ABC team also distributed the company's manufacturing overbead to four activities as shown below: Activity Bunnies Foxes Total Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total manufacturing overhead cost Manufacturing Overhead $ 207,765 91,000 62,900 153,900 143,880 77 250 327 101,800 2 60,200 NA NA NA 513,645 Required (show your calculation): 1. Calculate the activity rate (6 marks) 2. Calculate the cost assigned to stuffed bunnies and foxes using the activity-based costing system (5 marks). 3. Calculate the total dollar amount of the product margin for stuffed bunnies and foxes, respectively (6 marks). Hint: the product margin is the total product sales minus all the direct and indirect costs associated with the product, but it does not consider organization-sustaining costs.