Reference no: EM13846864

ABC versus traditional costing. Motorola Corporation manufactures cell phones and pagers in a particular factory. Assume that overhead costs are currently allocated using direct labor hours, but the controller has recommended an activity-based costing system using the following data:

Activity Level

Activity Cost Driver Cost Cell Phones Pagers

Production Setup	Number of Setups	$100,000	12	8
Material Handling and Requisition	Number of Parts	20,000	70	30
Packaging and Shipping	Number of Units Shipped	160,000	120,000	40,000

Total Overhead .......................................................................................... $280,000

Compute the amount of overhead allocated to each of the products under activity-based costing.

Compute the amount of overhead to be allocated to each product using labor hours as the allocation base. Assume 60,000 labor hours were used to assemble cell phones and 20,000 labor hours were used to assemble pagers.

Should the company adopt an ABC system?