roblem 3-16A Contrasting ABC and Conventional Product Costs LO03-2, LO3-3, LO3-4] 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 0.60 hours of direct labor time per unit to manufacture and extensive machining in the automated portion of the plant. The LEC 40 requires only 0.20 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 popularlty of the company's new LEC 90, profits have been declining steadily Management is beginning to bellieve 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 Direct materials Direct labor (0.20 hours and 0.60 hours o $20.00 per hour) $28.00 $ 4.00 LEC 90 $46.00 $ 12.00 Management estimates that the company will incur s505.000 in manufacturing overhead costs during the current year and 50.000 units of the LEC 40 and 25,000 units of the LEC 90 wll be produced and sold