Shine Company produces two types of control devices: Standard and Deluxe. The price for Standard and Deluxe is set based upon total manufacturing cost per unit. The following data pertains the two products STANDARD DELUXE Production and sales volume 60.000 40.000 units Selling price $17.00 $20.00 Direct material Direct labor $2.50 $4.50 $6.20 $7.20 In addition to direct material and direct labor costs, each product is charged with a portion of company's total factory overhead costs. Currently, Shine is allocating factory overhead costs to product lines based upon direct labor hours. Tom, the manager in charge of Deluxe operation, has raised concerns about the credibility of the cost data. Specifically, Tom believes that actual manufacturing cost of Deluxe is less than what currently is reported. As a result, the price set for Deluxe is less competitive affecting sales volume. Furthermore, this issue has affected negatively the moral of the employees working in Deluxe operations because of fear of downsizing. Shine Company has hired Sherry, a Clayton State graduate, to look at the matter. Sherry has stated that the problem could be due to the method used for the allocation of factory overhead cost. She has pointed out that factory overhead costs are not traceable, and accuracy of the amount factoryloverhead assigned to each product line depends on the allocation method used. Upon preliminary study. Sherry has decided to revise the allocation of factory overhead costs using Activity Based Costing based on the following two activities - Supervision and Inspection activities. The following additional data on the two products have been compiled for this purpose: Activity Cost Activity Cost Driver Activity Supervision $136,400 # of direct labor hours Inspection $162.800 # of Inspections Total factory overhead $299,200