A)

these activities. ABC links all the costs of activities (e g. machine setup, machinely, inspection) to a product, based on the consunption of that resource by the product Micro Magic'S Jim rtly ActiviOBed in Melbourne at which ABC Stems were discussed He is convinced that such a system would help Micro Magic's management to understand its product costs better On his return, as a first step, he identified cost drivers for Micro Magic's overhead costs. Then he launched a special smdy, which determined that Micro Magic's three products are responsible for the following . (See Exhibit 3). EXHIBIT 3 Propoltions of Each Cost Driver Product Produc t w Overhead Item Machine setup Machinely Matenal handling Cost Driver Number of setups Machine hours Number of inspections Raw material costs Number of change orders Product 500/0 450/0