Rapp Company is considering switching to an Activity-based costing system (ABC). The company produces and sells two products: LoEnd and HiEnd. The company consists of two departments: Production(where the products are made) and marketing (which engages in selling admin activity). The company traditional costing system computes unit product costs as dictated by GAAP; direct labor cost (DLC) is used in the allocation base for manufacturing overhead cost (the overhead rate is rounded to the nearest cent). The ABC will include in unit cost all cost that are easily associated with units. In addition in the ABC system, there are four major indirect activities: Machine Setup, Special processing, general factory, and customer relation( 9% of customer relation cost relate to manufacturing and is incurred in the production department: the rest is incurred in the marketing department.) In the ABC system, customer relation cost will be associated with customers, and the rest of the cost will be associated with the units of the two products.

The prices, Direct Materials (DM) cost, shipping cost, and Direct Labor Hours (DLH) cost below are given for one unit of the product:

Product	Price	DM	DLH	Units	Hourly Wage- Direct Labor	Shipping cost
HiEnd	$250	$60	2	4000	$10	$3
LoEnd	$150	$44	1	6000	$15	$1

The company collected ABC Data as Follows:

Activity cost pool	Activity measure	estimated OverHead cost	LoEnd	HiEnd	Total
Machine Set Up	#of Set up	$360,000	40	120	160
Speacil Processing	Machine Hours	135,000	8000	12000	20000
General Factory (excluding customer relation)	DLC	225,000			?
customer Relation	#of customer	200,000
	Total	920,000

what is the difference between the HiEnd product's unit costs computed by the traditional and ABC systems?

A) Under the traditional costing system, the HiEnd unit cost is higher by 2.25/ per unit

B) Under the traditional costing system, the HiEnd unit cost is lower by 2.25/ per unit

C) Under the traditional costing system, the HiEnd unit cost is higher by 5.25/ per unit

D) Under the traditional costing system, the HiEnd unit cost is lower by 5.25/ per unit