Smart Electronics manufactures two types of gaming consoles, models M-11 and R-24. Currently, the company allocates overhead costs based on direct labor hours; the total overhead cost for the past year was 80,000. Additional cost information for the past year is presented below. Product Name M-11 Total Direct Labor Hours Used 650 Units Sold R-24 150 1,300 1,500 Direct Costs Selling Price per Unit 10 30 per Unit 90 60 Recently, the company lost bids on a contract to sell Model M-11 to a local wholesaler and was informed that a competitor offered a much lower price. Smart's controller believes that the cost reports do not accurately reflect the actual manufacturing costs and product profitability for these gaming consoles. He also believes that there is enough variation in the production process for models M-11 and R-24 to warrant a better cost allocation system. Given the nature of the electronic gaming market, setting competitive prices is extremely crucial. The controller has decided to try activity-based costing and has gathered the following information. M-11 R-24 Total activity cost Number of Setups 3 Number of Components Number of Material Movements 17 15 7 33 35 20,000 50,000 10,000 The number of setups, number of components, and number of material movements have been identified as activity-cost drivers for overhead. Instructions: 1) Using the current costing system of the company, calculate the gross margin per unit for Model M11 and Model R24. Assume no beginning or ending inventory. Show your calculations 2) Using the ABC system of the company, calculate the gross margin per unit for Model M11 and Model R24. Assume no beginning or ending inventory. Show your calculations. 3) Which method do you prefer. Justify your