Star peripherals ltd manufactures two different multifunction printers (MFPs) for the business market. Information of the two models of products is available as follows:

	Basic model	Advanced model
Direct material	$800	$1600
Direct labour	300	600
Labour hours per unit	10 hours	20 hours
Units produced	3000 units	500 units

The total manufacturing overhead for the whole plant is estimated at $1600,000, in the current year, the company is using the traditional costing system which allocates manufacturing overhead to the products based on a plantwide overhead rate per direct labour hour.

From next year onwards, the company has planned to implement an activity-based costing system to allocate its manufacturing overhead costs to the products. The activity cost pools identified and the activity driver data are estimated as follows:

Activity cost pool(cost driver)	ACTIVITY COSTS ($)	Basic model	Advanced model
Machine setup (no. of setups)	300,000	50 setups	150 setups
Material receiving (kgs 0f materials)	180,000	30,000 kgs	50,000 kgs
Inspection (no. of inspections)	160,000	700 inspections	900 inspections
Machinery related (machine hours - MH)	960,000	20,000 MH	40,000 MH
Total manufacturing overhead	1,600,000

Calculate the costs per unit of the two products using the two costing system

1. Traditional costing system
2. Activity-based costing system
3. Based on your calculation in (1) above, explain which product is overcosted and which product is undercosted using the traditional costing system and briefly discuss the impact of product overcosting and undercosting to the organisation.