Supreme Company (Supreme) produces two types of fans: Deluxe and Standard. It adopts traditional overhead allocation method to allocate manufacturing overhead costs, using direct labor dollars as cost allocation basis. In 2020, Supreme compiled the following data for the two products:

		Deluxe		Standard
Sales units		50,000		400,000
Sales price per unit	$650.00			$475.00
Direct material and direct labor costs per unit	$180.00			$130.00
Manufacturing overhead costs per unit	$ 80.00			$120.00

Last year, Supreme purchased an expensive artificial intelligence system to allow automation for more decorative fan products in the deluxe product line. The CFO suggested that an activity-based costing analysis (ABC) could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information for 2020:

Activity		Cost Driver			Cost			Total		Deluxe		Standard
Setups		Number of setups		$ 5,000,000			5,000			4,000		1,000
Machine-related Number of machine hours				$42,000,000			600,000			300,000		300,000
Packing		Number of shipments		$ 5,000,000			250,000			50,000		200,000

Required:

a. Using the traditional overhead allocation method, what is the estimated total cost of manufacturing one unit for each type of fan? (1 mark)

b. Using the traditional overhead allocation method, estimated manufacturing overhead costs per unit are less for the deluxe fan ($80 per unit) than the standard fan ($120 per unit). Suggest one possible reason for this. (1 marks)

c. Regarding the machine-related costs, suggest one possible reason why the machine-related costs is so high. What might explain why total machining hours for the deluxe fans (300,000 hours) are the same as for the standard fans (300,000 hours)? (1.5 marks)

d. Using the activity-based costing data presented above,

1. compute the cost-driver rate for each overhead activity. (4.5 marks)

2. compute the revised manufacturing overhead cost per unit for each type of fan. (2 marks)