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Brightstar Inc. produces 2 types of products, Lite" and "Max". It expects to produce 50,000 units of Lite and 75,000 units of Max. Direct material cost in 2021 is expected to be $30.00 per unit for Lite and $70.00 per unit for Max. Brightstar's total direct labour cost for Lite is expected to be $50.00 per unit and $25.00 per unit for Max. Other manufacturing costs are considered as overhead. The estimated total annual overhead for the year is $5,775,000. The company is deciding to use the activity-based costing (ABC) system to allocate all its overheads. The company estimates that Electricity costs amounts to $2,325,000; Setup costs amounts to $900,000; and Processing costs amounts to $2,550,000. Brightstar obtained the following information : Electricity Setup Processing Cost Driver Machine Hours No. of setup Processing Hours Lite 100,000 2 175,000 Max 400,000 4 875,000 Required : (a) Calculate the total cost per unit of Max only (assuming that the expected no. of units are produced) using the activity-based costing system. (6 marks) (6) Prior to implementing the activity-based costing system, Brightstar uses the traditional costing system. Under traditional costing, the total cost of Max was $128.00 per unit. The selling price of Max was $220.00 per unit. The marketing manager proposed that the company should give a discount of $70.00 per unit as it would increase the demand for the product. Should Brightstar give the discount? Show all necessary computations to justify your answer. (4 marks)

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