The company is using the traditional costing system: all manufacturing overhead costs are allocated across products using a plant-wide predetermined overhead rate of $50 per direct labor hour. Given that traditional costing systems may result in significant cost distortions when determining products costs, company supervisor is asking to explore the potential for implementing activity-based costing. Mainely Lobster Income Statement Year Ended December 31, 2021 Data from the activity-based costing system: Activity cost pool Supporting direct labor Order Processing Customer accommodations Organization sustaining Expected activity Activity measure Number of direct labor hours Number of purchase orders Number of customer requests Not applicable Fresh Frozen | Total 2,400 4,000 6,400 300 200 500 200 0 200 Sales Cost of goods sold $2,160,000 Direct materials Direct labor Manufacturing overhead Gross margin Selling and administrative expenses $640,000 $192,000 $320,000 1,152,000 1,008,000 Variable Selling expenses Fixed Selling expenses Total administrative expenses Net operating income 224,000 250,000 160,000 634,000 $374,000 Company considers customer accommodations as a product-level activity, because the cost associated with customer accommodations only incurs when customers order fresh lobster rolls, as mentioned before. Production volumes are set equal to sales volumes since the company only make lobster rolls that they have orders for. Consequently, the company never has a beginning or ending work in process inventory, and it does not have a beginning or ending finished goods inventory either. 1A. Calculate total gross margin for each of the two products, fresh lobster rolls and frozen lobster rolls, using the traditional costing system. Recall that manufacturing overhead is applied based on a plant-wide predetermined overhead rate of $50 per direct labor hour. The amount of gross margin should be on a total basis and on a per-unit basis using the following template for guidance: Sales Fresh $$$ Four activity cost pools and the distribution of overhead costs (manufacturing, administrative, and selling) Cost of goods sold across the four pools: Direct materials Direct labor $$$ Supporting Activity Cost Pools Order direct labor processing Manufacturing overhead 30% 10% 40% Customer Organization accommodations sustaining Total 20% Manufacturing overhead $$$ Gross margin 100% Average gross margin per unit $$$ Frozen $$$ $$$ $$$ $$$ $$$ SS$ S$$ Fixed selling expenses 10% 55% 25% 10% 100% Total administrative expenses 5% 25% 10% 60% 100% Product specific data: 1B. Calculate product margin for the two products, fresh lobster rolls and frozen lobster rolls, using the activity-based costing system. The amount of product margin should be on a total basis and on a per-unit basis using the following template for guidance: Fresh Frozen Fresh Frozen Sales $$$ $$$ Units sold Unit selling price 12,000 20,000 Direct costs $55 $75 Direct materials $$$ $$$ Direct materials per unit $20 $20 Direct labor S$$ $$$ Direct labor hours per unit 0.2 0.2 Variable selling expense S$$ $$$ Overhead costs Direct labor rate (per direct labor hour) $30 $30 Supporting direct labor $$$ $$$ Predetermined overhead rate (per direct labor hour) $50 $50 Processing orders $$$ $$$ Customer accommodations S$$ S$$ $$$ SS$ Variable selling expenses per unit $2 $10 Product margin S$$ $$$ Average product margin per unit $$$ SS$