# Question

Paradiso Corp. is the manufacturer of food processors. It currently has two product lines, the Basic and the Industrial. Paradiso has $85,170 in total overhead. The company has identified the following information about its overhead activity cost pools and the two product lines:

Required:

1. Suppose Paradiso used a traditional costing system with machine hours as the cost driver.

Determine the amount of overhead assigned to each product line.

2. Calculate the activity proportions for each cost pool in Paradiso’s ABC system.

3. Calculate the amount of overhead that Paradiso will assign to the Basic product line if it uses an ABC system.

4. Determine the amount of overhead Paradiso will assign to the Industrial product line if it uses an ABC system.

5. Compare the results for a traditional system with those of an ABC system. Which do you think is more accurate andwhy?

Required:

1. Suppose Paradiso used a traditional costing system with machine hours as the cost driver.

Determine the amount of overhead assigned to each product line.

2. Calculate the activity proportions for each cost pool in Paradiso’s ABC system.

3. Calculate the amount of overhead that Paradiso will assign to the Basic product line if it uses an ABC system.

4. Determine the amount of overhead Paradiso will assign to the Industrial product line if it uses an ABC system.

5. Compare the results for a traditional system with those of an ABC system. Which do you think is more accurate andwhy?

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