Goldstar Corporation manufactures two types of portable air conditioners: Model A, a 4,000 BTU unit and Model B, a 6,000 BTU unit. A review of the company's accounting records revealed the following per-unit costs and production volumes:

\begin{array}{lccc}&\underline{\text { Model }} & \text { Model } \\&\underline{\mathrm{A}}&\underline{\mathrm{B}}\\\text { Production volume (units)} & \underline {3,000 } & \underline {6,000 } \\\text { Direct material} & \$50 & \$ 29\\\text { Direct labour:} & & \\\text { 2 hours at \$ 14} & 28 & \\\text { 3 hours at \$ 14} & & 42 \\\text { Manufacturing overhead:} & & \\\text { 2 hours at \$ 93} & 186 & \\\text { 3 hours at \$ 93 } & & 279 \\\end{array}

Manufacturing overhead is currently computed by spreading overhead of $2,060,000 over 40,000 direct labour hours. Management is considering a shift to activity-based costing in an effort to improve the firm's accounting procedures, and the following data are available.

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\text { Cost Driver Volume }

\begin{array}{l}\begin{array}{|l|l|}\hline{\text { Cost Pool }} &{\text { Cost }} \\\hline \text { Setups } & \$ 260,000 \\\hline \text { General Factory } & 1,600,000 \\\hline \text { Machine Processing } & 130,000 \\\hline &\$ 1,990,000\\\hline\end{array}\begin{array}{l|l|l|l|}\hline\text { Cost Driver } & \text { Model A } & \text { Model B } & {\text { Total }} \\\hline \text { Number of setups } & 100 & 30 & 130 \\\hline\text { Direct labour hours } & 25,000 & 15,000 & 40,000 \\\hline\text { Machine hours } & 2,200 & 1,050 & 3,250 \\\hline\\\hline\end{array}\end{array}

Goldstar determines selling prices by adding 60% to a product's total cost.
Required:
A. Compute the per-unit cost and selling price of Model B by using Goldstar's current costing procedures.
B. Compute the per-unit overhead cost of Model B if the company switches to activity-based costing.
C. Compute Model B's total per-unit cost and selling price under activity-based costing.
D. Goldstar has recently encountered significant international competition for Model B, with considerable business being lost to very aggressive suppliers. Will activity-based costing allow the company to be more competitive with Model B from a price perspective? Briefly explain.
E. Will the cost and selling price of Model A likely increase or decrease if Goldstar changes to activity-based costing? Why? Hint: No calculations are necessary.

Profile Incorporated, an Appliance Manufacturer, Is Developing a New Line

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