Randel Manufacturing makes two products: Budget and Deluxe. For traditional costing, Randel uses Direct Labor hours to calculated its overhead rate. The following information has been presented by the cost accountant:

Activity Cost pool	Cost Driver	Estimated OH	Estimated Activities
Ordering and Receiving	Orders	$ 130,000	1,000 Orders
Machine Setup	Setups	297,000	900 Setups
Machining	Machine Hours	1,000,000	250,000 Machine Hours
Assembly	Parts	16,000	2,000,000 Parts
Inspection	Inspections	300,000	1,000 Inspections
Total Overhead		$ 1,743,000

The direct labor rate for Randel is $20 per direct labor hour. The estimated Direct Labor hours for the period are 300,000 hours.

The information for the products follows:

	Budget	Deluxe
Direct Materials	$8/unit	$15/unit
Direct labor Hours	0.35 DLH/unit	0.275 DLH/unit
Orders	600	400
Setups	500	400
Machine hours	150,000	100,000
Parts	1,200,000	800,000
Inspections	550	450
Units	700,000	200,000

Required:

1) Compute the Traditional Costing Predetermined Overhead Rate

2) Allocate overhead using your Predetermined Overhead Rate

3) Compute the manufacturing cost per unit.

4) Compute the activity rates under Activity Based Costing (ABC)

5) Allocate the overhead using the ABC activity rates

6) Compute the manufacturing cost per unit

7) Discuss whether Randel company should use Traditional costing or ABC. Please explain.