Problem $5-40($Algo$)$ Activity$-$Based Costing; Customer Group Cost Analysis $[$LO $5-1,5-3,5-6]$Skip to questionFranklin Furniture Incorporated $($FFI$)$ manufactures bedroom furniture in sets $($a set includes a dresser, two queen$-$size beds, and one bedside table$)$ for use in motels and hotels. FFI has three customer groups, which it calls the value, quality, and luxury groups. The value products are targeted to low$-$price motels that are looking for simple furniture, while the luxury furniture is targeted to the very best hotels. The value line is attractive to a variety of hotels and motels that appreciate the combination of quality and value. Currently there has been a small increase in the quality and value lines, and an appreciable increase in demand in the luxury line, reflecting cyclical changes in the marketplace. Luxury hotels are now in more demand for business travel, while a few years ago, the value segment was the most popular for business travelers. FFI wants to be able to respond to the increased demand with increased production but worries about the increased production cost and about price setting as its mix of customers and production changes. FFI has used a volume$-$based overhead allocation rate based on direct labor hours for some time. Direct labor cost is $$15$ per hour. Budgeted CostCost DriverMaterials handling$ $314,600$Number of partsProduct scheduling$142,400$Number of production ordersSetup labor$237,600$Number of setupsAutomated machinery$1,452,500$Machine hoursFinishing$638,100$Direct labor hoursPack and ship$261,400$Number of orders shipped $ $3,046,600$ General, selling, and administrative costs$ $5,150,000$ The budgeted production data for the three product lines follow. Product LinesValueQualityLuxurySets produced$15,5004,300600$Price$ $600$$ $850$$ $1,150$Direct materials cost per set$ $90$$ $70$$ $130$Number of parts per set$3050110$Direct labor hours per set$457$Machine hours per set$3715$Production orders$5070200$Production setups$205050$Orders shipped$1,0002,000300$Number of inspections$2614$ Part $2($Algo$)$Required: $1$: Compare the two approaches and discuss the strategic and competitive issues of using each of the two methods? $4.$ The activity usage data given in the problem reflects current usage of the various cost drivers to manufacturethe firms product lines. Suppose you are given the following information regarding the firms practical capacity for each of these activities, as follows: Cost DriverPractical CapacityNumber of parts$940,500$Number of production orders$800$Number of setups$200$Machine hours$120,000$Direct labor hours$137,500$Number of orders shipped$4,900.2$:Compute the new activity rates using practical capacity and comment on how you would use this additional information for costing the firms products and assisting in strategic planning?