PB4-2 (Static) Assigning Costs Using Traditional System, Assigning Costs Using Activity Proportions [LO 4-1, 4-3, 4-5, 4-6]

Paradiso Corporation is the manufacturer of food processors. It currently has two product lines, the Basic and the Industrial. Paradiso has $85,170 in total overhead.

The company identified the following information about its overhead activity pools and the two product lines:

Activity Pools	Cost Driver	Cost Assigned to Pool	Quantity or Amount Consumed by Basic		Quantity or Amount Consumed by Industrial
Materials handling	Number of moves	$ 21,420	235	moves	275	moves
Quality control	Number of inspections	$ 43,350	578	inspections	867	inspections
Machine maintenance	Number of machine hours	$ 20,400	18,000	machine hours	16,000	machine hours

Required:

1. Suppose Paradiso used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line.
2. Calculate the activity proportions for each activity pool in Paradisos ABC system.
3. Calculate the amount of overhead that Paradiso will assign to the Basic product line if it uses an ABC system.
4. Determine the amount of overhead Paradiso will assign to the Industrial product line if it uses an ABC system.
5. Compare the results for a traditional system with those of an ABC system. Which do you think is more accurat