The Rings Division of ABC Corporation produces two types of rings at its Central Plant: Plain and Engraved. The following data exist for production at the Central Plant:

Ring Type	Quantity (units)	Prime Costs*	Machine Hours	Material Moves	Setups
Plain	1,000,000	$2,000,000	100,000	100,000	25
Engraved	150,000	$450,000	25,000	100,000	75

*Prime costs are direct labor and direct materials costs

The division budgeted the following amounts for its indirect activities:

Machine-Related	Material Movement	Machine Setup
$500,000	$850,000	$650,000

The current cost system assigns all indirect costs based on machine hour consumption.

A. The product manager for Plain Rings believes this existing system subsidizes (reduces) the reported cost of Engraved Rings at the expense of the reported cost of Plain Rings. Without performing any cost calculations, explain why the product manager for Plain Rings is correct.

B Compute the reported unit cost of each product using a multiple-allocation-base approach. Show your work clearly and explain any assumptions you make.

C. Identify at least three (3) separate and distinct reasons why the reported unit costs you calculated in Part B might not be equal to economic costs.