Reference no: EM132627876

The cost pool budget for Orca industries that produces television sets is as follows: Machine set-up related $132,000 Engineering related $96,000 Quality control $140,000 Total budgeted OH costs $368,000 Budgeted activity levels for the current year are: Direct labour Hours 8,200 Quality Inspection 10,000 Machine Set-up Hours 2,250 Engineering Changes 1,200 Direct costs for the Allegra model television set are $245 for material and $38 for labour. 2,500 Allegra models were produced and sold at a markup of 75%. Activity levels for the 2,500 Allegra sets were as follows: Direct labour Hours 2,800 Quality Inspection 2,500 Machine Set-up Hours 780 Engineering Changes 320

Required

Problem (a) Calculate the overhead cost of the 2,500 Allegra model sets if:

i. A volume based cost driver was in use, applying overhead on direct labour hours.

ii. An Activity Based Costing system was used to apply overhead.

Problem (b) Calculate the total cost to produce a single Allegra model using both the traditional method and ABC to allocate overheads. Would the selling price of the Allegra model be more or less if the ABC method for allocating overheads is adopted and by how much?