Pletzke Company manufactures dental instruments. The company’s product line includes products as simple as dental picks and products as complex as panoramic x-ray machines. Carol Lindquist, a senior product manager responsible for implementing an activity-based costing system at Pletzke, identified the following three activity cost pools: assembling, packaging, and designing. Carol also investigated the components of overhead cost and determined that each cost is split among the three cost pools based on the following percentages.

Required

a. Using the percentages above, calculate the costs included in each of the three activity cost pools.

b. Why might Carol have felt the need to implement an activity-based costing system? Be sure to con sider how costs are incurred within the three categories.

Transcribed Image Text:

Cost Category Total Cost Assembling Packaging Designing Salaries $3,500,000 35% 15% 50% Supplies 640,000 65% 25% 10% Utilities 480,000 60% 35% 5%