Question TikTok Electronics manufactures an aluminium fibre tripod model "TRI-X" which sells for $1,500. The production cost computed per unit under traditional costing for each model in 2019 was as follows: Traditional Costing Direct Materials Direct Labour ($20/hour) Manufacturing overhead ($38 per DLH) Total per unit cost TRDX $700 $120 $228 $1.048 TT1 In 2019, TikTok Electronics manufactured 26,000 units of TRI-X. Under traditional costing, the gross profit on TRI-X was $552 ($1,600-$1,048). Management is considering phasing out TRI- X as it has continuously failed to reach the gross profit target of $600. Before finalizing its decision, management asks TikTok Electronics management accountant to prepare an 2 HOLMES INSTITUTE analysis using activity-based costing (ABC). The management accountant accumulates the following information about overhead for the year ended December 31, 2019. Cost Drivers Activity Cost Pools Purchasin Estimated Overhead $1,200,000 Expected Use of Cost Drivers 40,000 Machine setups 900.000 18,000 Number of orders Number of setups Machine hours Number of inspections Machining Quality Control 4,800,000 700,000 120,000 28.000 The cost drivers used: Cost Drivers Purchase orders Machine setups Machine hours Inspections TRI-X Product 17,000 5,000 75.000 11.000 Required: 1. Calculate the activity rates for each of the overhead items using the four cost drivers. (3 marks) 2. Using the rates in (1) determine the unit cost for TRI-X. (4 marks) 3. Calculate the gross profit of each model of TRI-X based on ABC costings and recommend whether or not TRI-X should be discontinued. (4 marks) SHOW YOUR WORKING