The next three questions are based on the following:

A company is considering switching to an activity$-$based costing $($ABC$)$ system. The company produces and sells two products: Basic

and Pro. The production of the Pro products requires more expensive materials and more experienced workers. The company consists

of two departments: Production $($where all manufacturing activities are taken$)$ and Marketing $($which engages in selling and admin

activity only$).$ The company's traditional costing system computes unit product costs as dictated by GAAP; direct labor cost

$($DLC$)$ is used as the allocation base for manufacturing overhead cost $($the overhead rate is rounded to the nearest cent$).$ The ABC

system will include in unit costs all costs easily associated with units. In addition, in the ABC system, there are four major indirect

activities: Machine Setups, Special Processing, Factory Supervision, and Customer Relations.

In the ABC system, Customer Relations costs will be associated with customers; the rest of the costs will be associated with units of

the two products. $9\%$ of Customer Relations cost relates to manufacturing and is incurred in the Production Department; the rest of

the Customer Relations cost is incurred in the Marketing Department.

The prices, direct material cost $($DM$),$ shipping cost and DLHs below are given for one unit of the product.

The company collected the data for ABC as follows:

$4$ What is the difference between the Pro product's unit costs computed by the traditional and ABC systems?

A$.$ Under the traditional costing system, the unit cost of the Pro product is higher by

B$.$ Under the traditional costing system, the unit cost of the Pro product is lower by

C$.$ Under the traditional costing system, the unit cost of the Pro product is higher by

D$.$ Under the traditional costing system, the unit cost of the Pro product is lower by

$ $2\mathrm{.}25$ per unit.

E$.$ None of the above