A18 Ax & fx B D E F G 1 Kragan Clothing Company manufactures its own designed and labeled athletic wear and sellis its products through catalog sales and retail outlets. While Kragan has for years used activity-based costing in its manufacturing activities, it has always used traditional costing in assigning its selling costs to its product lines. Selling costs have traditionally been assigned to Kragan's product lines at a rate of 70% of direct materials costs. Its direct materials costs for the month of March for Kragan's Thigh-intensity line of athletic wear are $400,000. The company has decided to extend activity-based costing to its selling costs. Data relating to the high-intensity line of products for the month of March are as follows. 2 3 Cost Drivers Overhead Rate Activity Cost Pools 4 5 Salos commissions 6 Advertising-TV 7 Advertising--Internet 8. Catalogs 9 Cost of catalog sales 10 Credit and collection 11 Instructions 12 Dolar sales Minutes Column inches Catalogs maled Catalog orders Dollar sales $0.05 per dollar sales $300 per minute $10 per column inch $2.50 per catalog $1 per catalog order $0.03 per dollar sales Number of Cost Drivers used per activity $ 900.000 250 2.000 60,000 9,000 900,000 13 a. Compute the selling costs to be assigned to the high-intensity line of athletic wear for the month of March 14 (1) using the traditional product costing system (direct materials cost is the cost driver) (5 Points) 15 (2) using activity based costing (5 points) 16 b. By what amount does the traditional product costing system undercost or overoost the high-intensity product line relative to costing under 17 ABC2.5 points) 18 19