Question 3: H&R Manufacturing has five activity cost pools and two types of products, product A and B. Production is 6,000 units of product A and 4,000 units of product B. The following information related to its budgeted operations for the current year: Product A Product B Sales Revenue $750,000 $400,000 Direct material $225,000 $190,000 Direct labor $255,000 $125,000 Overhead $80,000 $90,000 Operating income\(loss) $ 190,000 $ (5,000) Since the company has projected loss of Product B, the company management is thinking of using ABC Costing to assign its overhead cost. Here are the five activity cost pools and related information the management developed: Activity Cost Pool Cost Driver Estimated Overhead Cost Drivers per Product Product A Product B Ordering Orders $ 12,000 200 150 Machine Setup Setups 20,000 250 300 Machining Machine hours 65,000 15,000 10,000 Assembly Parts 15,000 700 800 Inspection Inspections 10,000 150 100 Instructions 1- Compute the overhead rates per each cost driver. 2- Calculate total and per unit assigned overhead to each product. 3- Compute the operating income using the activity based overhead rate. Based on your calculation, what do you think H&R company should decide? Page 4 of 4