QUESTION 10 Velshi Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2015, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages. For 2015 Velshi Printers has decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis: Cost pool Manufacturing overhead costs Activity level Design changes $ 120,000 300 design changes Setups 640,000 5,000 setups Inspections 80.000 8,000 inspections Total manufacturing overhead costs $840,000 During 2015, two customers, Money Managers and Hospital Systems, are expected to use the following printing services: Activity Money Managers Hospital Systems Pages 60,000 76,000 Design changes 0 Setups 20 10 Inspections 30 38 Required: 1. How much overhead is assigned to the customers if the traditional allocation method with number of pages as allocation base is used? [2 marks] 2. How much overhead is assigned to the customers using the activity based costing system? [3 marks] 3. How do you explain any difference in the costs allocated using the two systems? [2 marks] 10