1. Carter, Incorporated, produces two products, Product A and Product B. Carter uses a traditional volume-based costing system in which direct labor hours are the allocation base. Carter is considering switching to an ABC system by splitting its manufacturing overhead cost of $783,000 across three activities: Design, Production, and Inspection. Under the traditional volume-based costing system, the predetermined overhead rate is $2.61 per direct labor hour. Under the ABC system, the rate for each activity and usage of the cost drivers are as follows:

Activity Pool (Driver)	Activity Rate	Usage by Product A	Usage by Product B
Design (engineering hours)	$ 500	per hour	100	300
Production (direct labor hours)	$ 1.25	per hour	100,000	200,000
Inspection (batches)	$ 520	per batch	300	100

Required:

1. Calculate the indirect manufacturing costs assigned to Product A under the traditional costing system.
2. Calculate the indirect manufacturing costs assigned to Product B under the traditional costing system.
3. Calculate the indirect manufacturing costs assigned to Product A under the ABC system.
4. Calculate the indirect manufacturing costs assigned to Product B under the ABC system.
5. Which product is undercosted and which is overcosted under the volume-based costing system compared to ABC?

2. Carter, Incorporated, produces two products, Product A and Product B. Carter uses a traditional volume-based costing system in which direct labor hours are the allocation base. Carter is considering switching to an ABC system by splitting its manufacturing overhead cost across three activities: Design, Production, and Inspection. The cost of each activity and usage of the cost drivers are as follows:

Activity Pool (Driver)	Cost of Pool	Usage by Product A	Usage by Product B
Design (engineering hours)	$ 334,800	220	320
Production (direct labor hours)	486,800	102,000	302,000
Inspection (batches)	228,800	320	120

Carter manufactures 10,200 units of Product A and 7,700 units of Product B per month.

Required:

1. Calculate the predetermined overhead rate under the traditional costing system.
2. Calculate the activity rate for Design.
3. Calculate the activity rate for Machining.
4. Calculate the activity rate for Inspection.
5. Calculate the indirect manufacturing costs assigned to each unit of Product A under the traditional costing system.
6. Calculate the indirect manufacturing costs assigned to each unit of Product B under the traditional costing system.
7. Calculate the indirect manufacturing costs assigned to each unit of Product A under the ABC system.
8. Calculate the indirect manufacturing costs assigned to each unit of Product B under the ABC system.
9. Which product is undercosted and which is overcosted under the volume-based cost system compared to ABC?