Winston Corporation manufactures two types of filing cabinets - Deluxe and Executive - and applies manufacturing overhead to all units at the rate of $80 per machine hour. Production information follows. Direct material cost Direct labour cost Budgeted volume (units) Deluxe Executive $40 $65 $25 16,000 $25 30,000 The financial controller, who is studying the use of activity-based costing, has determined that the firm's overhead can be identified with three activities: manufacturing setups, machine processing, and product shipping. Data on the number of setups, machine hours, and outgoing shipments, which are the activity's three respective cost drivers, follow. Deluxe Executive Total Setups 100 60 160 Machine hours 32,000 45,000 77,000 Outgoing shipments 200 150 350 The firm's total overhead of $6,160,000 is subdivided as follows: Manufacturing setups Machine processing Product shipping Total Required: $1,344,000 3,696,000 1.120.000 $6,160,000 (i) Compute the unit manufacturing cost of Deluxe and Executive filing cabinets by using the company's current overhead costing procedures. (ii) Compute the unit manufacturing cost of Deluxe and Executive filing cabinets by using activity-based costing. Is the cost of the Deluxe filing cabinet overstated or understated (i.e. distorted) by the use of machine hours to allocated total manufacturing overhead to production? By how much? (iii) (iv) Assume that the current selling price of a Deluxe filing cabinet is $270 and the marketing manager is contemplating a $30 discount to stimulate volume. Is this discount advisable? Briefly discuss.