Ellix Company manufactures two models of ultra-high fidelity speakers, the X 200 model and the X 99 model. Data regarding the two products follow:
Additional information about the company follows: (i) Model X 200 requires 72 in direct materials per unit, and model X 99 requires 50. (ii) The direct labor wage rate is 10 per hour. (iii) The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products. (iv) Model X200 is more complex to manufacture than model X99 and requires the use of special equipment. Consequently, the company is considering the use of activity-based costing to apply manufacturing overhead cost to products. Three activity cost pools have been identified as follows:
(c) Explain why manufacturing overhead cost shifts from Model X99 to Model X200 under activity based costing.