Seneca manufactures two products, Regular and Premium, and applies overhead on the basis of machine hours. Anticipated overhead and machine hour time for the upcoming accounting period are $640,000 and 20,000 machine hours, respectively. Information about the company's product follows: Regular: Estimated product volume 2500 units Direct material cost $20 per unit Direct labour cost $35 per unit Premium: Estimated product volume Direct material cost Direct labour cost 2000 units $35 per unit $48 per unit Seneca's overhead of $640,000 can be identified with three major activities: order processing, machining and quality control. These activities are driven by number of orders processed, machine hours worked, and inspection hours, respectively. Data on the activities' cost drivers are provided as follows (both budgeted and actual): Overhead activity Overhead Cost driver cost Regular Premium Order $90,000 Order processed 100 orders 200 orders processing Machining $350,000 Machine hours 10,000 hours 10,000 hours 4500 hours Quality control $200,000 Inspection hours 500 hours Senior management is very concerned about declining profitability despite a healthy increase in sales volume. The decrease in profit is especially concerning because the company installed highly automated machinery which was expected to improve operation efficiencies. Required: i) Assuming the use of machine hours is used to apply overhead costs to production, calculate the unit manufacturing costs of the Regular and Premium products if the expected manufacturing volume is attained. (2 marks) ii) Assuming use of activity-based costing, calculate the unit manufacturing costs of the Regular and Premium products if the expected manufacturing volume is attained. (5 marks) iii) Based on the answers in part i) and ii), comment on the differences in the costs calculated using the two product costing systems. (2 marks) iv) Seneca's selling prices are based heavily on cost. Is it possible that the differences in the costs calculated using the two product costing systems and the subsequent determination of selling prices are contributing to the company's declining profitability? Explain