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Pillar Company manufactures aproduct inthree different qualities, called 'Basic', 'Average' and 'Super'. The 'Basic' and 'Average' both requires 2.0 direct labor hours while 'Super' requires 2.5 direct labor hours. The company is able to sell these products at a price that gives a standard prot mark-up of 25 % of lll manufacturing cost. The company manufactures and sold 90,000 units, 60,000 units and 40,000 units of'Basic', 'Average' and 'Super' respectively. Manag-ent is concerned by the deterioration of prot. 9' Material and labor costster unit are as follows: Em Anne: Sum Direct materials $20.00 $30.00 $40.00 Direct labor (all $8I'hour) $16.00 $16.00 $20.00 |+| + K 3| The total overheads are $10,000,000. Currently, the company is using direct labor-hour as an allocation base to apply overheads. Recently, the business management accountant has undertaken an exercise to try to identify activities and cost drivers in an attupt to be able to deal with the overheads on a more precise basis using the activity based costing approach. An analysis has provided the following information: Activity (and cost driver) Costs Annual number of activities 19.13] mil: Mm: Sum Number ofmachine setups $3,000,000 5,000 1,000 1,500 2,500 Number ofqualjty inspections 2,000,000 8,000 3,000 1,800 3,200 Number ofproduction orders 1,700,000 1,700 550 470 680 General production (MI-I) 3,300,000 330,000 110,000 100,000 120,000 Total $10,000,000 + Required: a. Calculate the predetermined overhead rate using the current basis of allocation and determine the overhead per unit, total cost per unit and the selling price for the three models. (7 marks) b. Calculate the activity rate, the overhead per unit, the total cost per unit for the three models using the activity based costing approach. [14 marks) c. What conclusions do you draw based on the above results? What advice would you offer the management of the company? (4 marks)