Question 3: Activity Based IIIZosting l9 marksi lGiven increasing competition and pressure on margins in the craft brewing industry, Simona the nancial controller of Federer Inc. invited in a highlyregarded team of management consultants For advice. At the postvisit meeting; they advised Simona that Federer Inc. should consider adopting an Activity Based Costing {ABC} approach to allocate overhead costs. Federer Inc. currently uses a plantwide predetermined overhead rate based on machine hours to allocate overhead costs. Simona has done some preparatory work to explore this adoption decision. She has established the following overhead cost pools and cost drivers For the scal year beginning November 1; 2016 and ending October 31, 201?: Budgeted Estimated Activity Overhead Cost Pool Overhead Cost Driver Rates For the Fiscal Year Manufacturing Overheads Machine setups 5250;000 Number ofsetups 125 setups Materials handling 5130;000 Number of barrels 6,500 barrels Other productionrelated manufacturing overheads 5400;000 Number of machine 30000 machine hours hours Non -N'| an u'Factu ring Overheads Quality control 5330;000 Number of inspections 1; 100 inspections A customer, Muguruza Ltd., placed an order for 200 barrels of product. The order was completed on October 31, 201?. To Full; the order consumed the Following levels oi: activity: Machine setups 1 setup Machine hours L400 machine hours Quality inspections 6 inspections To evaluate the potential usefulness of ABC versus traditional {absorption} costing, Simona has asked you to calculate the cost outcome under both approaches and report back to her