Question 3 The Pitt Corporation manufactures two types of digital remotes, DR100 and DR200. For the current year, the Company expects to incur a manufacturing overhead cost of $3,060,000 and applies overhead based on machine hours. Production information for DR100 and DR200 follows: DR100 DR200 Direct Material Cost (per unit) $65 Direct Labour Cost (per unit) $25 $25 $40 Gerri Hallifax, the management accountant, has established the company's overhead cost is made up of four activity costs: $300,000 for manufacturing set-ups, $1,960,000 for machine processing, $400,000 for quality inspection and $400,000 for product shipping. This information is part of the new activity based costing (ABC) system Gerri has developed. The expected number of setups, machine hours, number of units and outgoing shipments are these activities' respective cost drivers. Information for these are detailed below: DR100 60 DR200 40 25,000 Number of Setups Machine Hours Number of Units Outgoing Shipments 15,000 6,000 14,000 120 80 Required: (a) Using the traditional costing approach, calculate the cost per unit for DR100 and DR200. Show all calculations. (b) (c) Calculate the activity cost driver rates. Show all calculations. Using your answer to part (b) calculate the cost per unit for DR100 and DR200. Show all calculations. For DR200, compare your results in part (a) with your results in part (c). Explain why DR200 is under or over costed when using the traditional costing approach. (d) "A successful implementation of ABC requires a bottom-up approach rather than a top-down approach". Do you agree? Discuss. (7 + 4 + 8 +5+4 = 28 marks)