Refer to Exhibit 5-6. Suppose the appliance maker has two plants—the Salem plant and the Youngstown plant. The Youngstown plant produces only three appliances that are very similar in material and production requirements. The Salem plant produces a wide variety of appliances with diverse material and production requirements. Which type of costing system would you recommend for each plant (traditional or ABC)? Explain.

Exhibit 6.5

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= Cost driver = Activity centre Traditional Cost System Activity-Based Cost System Overhead Costs Machining activity costs Assembly activity Direct materials Direct labour Overhead Direct Direct labour Quality inspection activity costs materials costs costs costs costs costs costs Processing hours (Cost Driver A Number of parts Number of inspections (Cost Driver C), Direct Direct DLH Direct Direct trace trace trace trace Driver B Products Products