a. Based on your results for Product A Overhead for Traditional Costing and the proposed ABC Costing: 1-Would you recommend Traditional Costing or ABC Costing for computing overhead? 2-Explain two reasons (benefits or drawbacks) for your decision. b. Explain and compare Product Level Activities to Facilty Level Activities. 1-Provide and explain two examples for Product Level Activities. 2-Provide and explain two examples for Facility Level Activities.

Messenger File Edit View Window Help G Ch17 Activity-Based-Costing - Part 2 125% EB A View Zoom Add Category Insert Table Chart Text Shape Media Comment Collaborate + Sheet1 Ac Based Costing versus Traditional Costing Problem. Shee Currently Paradise Industries is considering changing to an Activity Based Costing System due to increased Shee sales, increased number of products, and a more complex manufacturing process with many activities. Paradise Industries has the following overhead costs and cost drivers. Back Activity Cost Pools Cost Driver Estimated Overhead Cost Driver Activity Ordering and Receiving Orders $15,000 750 orders Machine Setup Setups $216,000 6000 setups Machining Machine hours $2,750,000 250,000 MH Assembly Parts $1,125,000 1,500,000 parts Inspection Inspections $2,000,000 20,000 inspections Traditional Cost Pool Direct Labor Hours $6,106,000 122,120 DL Hours 1: Compute the total overhead costs assigned to Product B using activity based costing: ABC Overhead Rate (Please Product B Overhead (Please Activity Cost Pool Product B Activity See Tip 1 below) See Tip 2 below) (a) (b) (axb) Ordering and Receiving 250 Orders Machine Setup 2,000 Setups Machining 85,000 Machine hours Assembly 400,000 Parts Inspection 5,000 Inspections Using ABC costing, Summarize Total Overhead Costs assigned to Product B Tip 1: ABC Overhead Rate = Estimated Overhead / Cost Driver ActivityA View Zoom Add Category Insert Table Chart Text Shape Media Comment Collaborate + Sheet1 (a) (b) (a x b) Sh Ordering and Receivin 250 Orders SH Machine Setup 2,000 Setups Machining 85,000 Machine hours Ba Assembly 400,000 Parts Inspection 5,000 Inspections Using ABC costing, Summarize Total Overhead Costs assigned to Product B Tip 1: ABC Overhead Rate = Estimated Overhead / Cost Driver Activity Tip 2: Product B Overhead = Product B activity x ABC Overhead Rate 2: Compute the total overhead costs assigned to Product B using traditional costing: Traditional Costing Product B Activity Traditional Overhead Rate Overhead Costs (Please See (Please See Tip 3 below) Tip 4 below (a) (b) (a x b) Traditional Cost Pool 16,620 DL Hours Tip 3: Traditional Overhead Rate = Estimated Overhead / Cost Driver Activity Tip 4: Product B Overhead = Product B activity x Traditional Overhead Rate 3: Compute and compare ABC Overhead Costs to Traditional Overhead Costs for Product B: Current Traditional OH Proposed ABC OH Increase/(Decrease) (a) (b) (b - a) Product B OH Costs