Required information Problem 4-16 Contrasting ABC and Conventional Product Costs (L04-2, LO4-3, LO4-4) The following information applies to the questions displayed below.) For many years, Thomson Company manufactured a single product called LEC 40. Then three years ago. the company automated a portion of its plant and at the same time introduced a second product called LEC 90 that has become increasingly popular. The LEC 90 is a more complex product, requiring 0.80 hours of direct labor time per unit to manufacture and extensive machining in the automated portion of the plant. The LEC 40 requires only 0.60 hours of direct labor time per unit and only a small amount of machining Manufacturing overhead costs are currently assigned to products on the basis of direct labor-hours. Despite the growing popularity of the company's new LEC 90, profits have been declining steadily Management is beginning to believe that there may be a problem with the company's costing system. Direct material and direct labor costs per unit are as follows: LEC 40 LEC 90 Direct materials $28.00 $48.00 Direct labor (0.60 hours and 0.80 hours @ $10.00 per hour) $ 6.00 $ 8.00 Management estimates that the company will incur $988,000 in manufacturing overhead costs during the current year and 60,000 units of the LEC 40 and 20,000 units of the LEC 90 will be produced and sold. Problem 4-16 Part 2 2. Management is considering using activity-based costing to assign manufacturing overhead cost to products. The activity-based costing system would have the following four activity cost pools: Estimated Overhead Activity Cost Pool Activity Measure Cost Maintaining parts inventory $161,000 Number of part types Processing purchase Number of purchase 80,000 orders orders Quality control Number of tests run 66,000 Machine-related Machine-hours 681,000 $988,000 Activity Measure Number of part types Number of purchase orders Number of tests run Machine-hours Expected Activity LEC 48 LEC 90 Total 450 700 1,150 1,600 400 2,000 700 1,500 2,200 1,600 10,400 12,000 Determine the activity rate for each of the four activity cost pools. (Round your answers to 2 decimal places.) Activity Cost Pool Maintaining inventory Processing purchase orders Quality control Machine-related Activity Rate per part type per order per test per MH