QUESTION THREE (16 marks) Siegel Company manufactures a product that is available in both a luxury and a classic model. The luxury model was introduced several years ago. Since the introduction of the luxury model, the company's profits have steadily declined and management has become increasingly concerned about the accuracy of its costing system Sales of the luxury model have been increasing rapidly. Manufacturing overhead has been assigned to products on the basis of direct labout hours using the traditional method in the past. The company has estimated that manufacturing overhead will total $900,000 for the current year. It is also estimated that they will produce 5,000 units of the luxury model and 40,000 units of the classic model. Materials and labour costs per unit are as follows: Luxury Classic Direct materials $40 $25 Direct labour $14 $7 Direct labour hours/unit 1 The activity-based costing system would have the following activity cost pools for the current year Estimated Estimated Cost Pools Cost Cost Driver Purchasing Processing Scrap/Rework Shipping $ 204,000 182,000 379.000 135,000 $ 900.000 Purchase orders issued Machine-hours Scrap/rework orders issued Number of shipments The company's other estimated operating statistics for the two products follow Estimated Volume by Product Cost Driver Luxury Classic Total Purchase orders issued Machine-hours Scrap'rework orders issued Number of shipments 200 20,000 1.000 250 400 15,000 1,000 650 600 35,000 2,000 900 REQUIRED: Management is now considering using activity-based costing to apply manufacturing overhead costs to products. a) Calculate all of the activity rates. b) Calculate the total overhead applied to the Luxury product only. c) Calculate the Luxury product's total unit cost using the ABC method d)Calculate the predetermined overhead rate using the traditional method. I e) Calculate the Luxury product's Overhead unit cost using the traditional method