Omega Services Ltd.

Scenario: Cost Allocation Methods

Data:

• Direct Costs:
  • Direct Materials: $50,000
  • Direct Labor: $30,000

• Indirect Costs:
  • Factory Overhead: $20,000
  • Administrative Costs: $15,000

Requirements:

1. Allocate factory overhead using the traditional costing method.
2. Allocate factory overhead using activity-based costing (ABC).
3. Compare and discuss the differences between traditional costing and ABC.