Required information The following information applies to the questions displayed below.] Kitchen King's Toledo plant manufactures three product lines, all multi-burner, ceramic cook tops. The plant's three product models are the Regular (REG), the Advanced (ADV), and the Gourmet (GMT). Until recently, the plant used a job- order product-costing system, with manufacturing overhead applied on the basis of direct-labor hours. The following table displays the basic data upon which the traditional costing system was based REG ADV GMT Planned annual production: Volume in units Production runs 5,000 40 runs of 125 units $129 4,000 40 runs of 100 units $151 1,000 20 runs of 50 units $203 Direct material Direct labor: Machine hours (MH) Total machine hours consumed (not including setup) per product unit by product line in a year $171 (9 hrs. $19 per hr.) 10 MH 50,000 (10 MH x 5,000) $209 (11 hrs. $19 per hr.) 12 MH 48,000 (12 MH x 4,000) $247 (13 hrs.@ $19 per hr.) 17 MH 17,000 (17 MH x 1,000) The annual budgeted overhead is $1,224,000, and the company's predetermined overhead rate is $12 per direct-labor hour. The product costs for the three product models, as reported under the plant's traditional costing system, are shown in the following table REG ADV GMT Direct material Direct labor (not including set-up time) Manufacturing overhead Total $129.00 171.00 (9 hr.$19) 209.00 (11 hr. $19) 247.00 (13 hr.$19) 108.00 (9 hr. $12)132.00 (11 hr. $12) 156.00 (13 hr. $12) $408.00 $151.00 $203.00 $492.00 $606.00 Kitchen King's pricing policy is to set a target price for each product equal to 130 percent of the full product cost. Due to price competition from other appliance manufacturers, REG units were selling at $525, and ADV units were selling for $628. These prices were somewhat below the firm's target prices. However, these results were partially offset by greater- than-expected profits on the GMT product line. Management had raised the price on the GMT model to $800, which was higher than the original target price. Even at this price, Kitchen King's customers did not seem to hesitate to place orders, Moreover, the company's competitors did not mount a challenge in the market for the GMT product line. Nevertheless concern continued to mount in Toledo about the difficulty in the REG and ADV markets. After all, these were the plant's bread-and-butter products, with projected annual sales of 5,000 REG units and 4,000 ADV units. Kitchen King's director of cost management, Angela Ramirez, had been thinking for some time about a refinement in the Toledo plant's product-costing system. Ramirez wondered if the traditional, volume-based system was providing management with accurate data about product costs. She had read about activity-based costing, and wondered if ABC would be an improvement to the plant's product-costing system. After some discussion, an ABC proposal was made to the company's top management, and approval was obtained. The data collected for the new ABC system is displayed in the following table 2 0 0 Activity Cost Pool $310,500 Machine Hours Product Quantity fo Product Lin Cost Driver Activity Machine related Line REG ADV 50,000 48,000 17,000 115,000 40 40 20 100 100 96 104 300 40 40 20 100 400 400 300 1,100 500 400 200 1,100 250 200 200 650 Total REG Material handling 52,500 Production Runs Total REG ADV Purchasing 75,000 Purchase Orders Total REG Setup 85,000 Production Runs Total REG ADV Inspection 27,500 Inspection Total REG Shipping 66,000 Shipments Total REG Engineering 32,500 Engineering Hours Total Facility 575,000 Machine Hours REG ADV GMT Total 50,000 48,000 17,000 115,000 2. Complete an activity-based costing analysis for Kitchen King's three product lines. (Round "Pool Rate" and "Activity Cost per of Product" to 2 decimal places.) Activity Cost per Unit of Product Cost Driver Cost Driver Quantity Activity Cost Driver Cost for Product Quantity for Product Product Line Activity Cost Pool Activity Line Product Line 50,000 48,000 17,000 115,000 40 40 20 100 100 96 104 300 40 40 Volume Line REG Machine related$ 310,500 Machine hours GMT Total REG ADV GMT Total REG ADV GMT Total REG ADV 52,500 Production runs Material handling Purchasing 75,000 Purchase orders Setup 85.000 Production runs 20 100 400 400 300 1,100 500 400 200 1,100 250 200 200 650 50,000 48,000 GMT Total REG ADV GMT Total REG Inspection 27,500 Inspection hours Shipping 66,000 Shipments GMT Total REG Engineering 32,500 Engineerin hours GMT Total REG Facility 575,000 Machine hours GMT Total Grand total 17,000 115,000