3. ABC (30 points) Aunt Ethel's Fancy Cookie Company manufactures and sells three flavors of cookies: Macaroon, Sugar, and Buttercream. The batch size for the cookies is limited to 1,000 cookies based on the size of the ovens and cookie molds owned by the company. Based on budgetary projections, the information listed below is available: Projected sales in units Macaroon 500,000 Sugar 800,000 Buttercream 600,000 PER UNIT data: Selling price $0.80 $0.75 $0.60 Direct materials Direct labor $0.20 $0.04 $0.15 $0.02 $0.14 $0.02 Hours per 1000-unit batch: Direct labor hours Oven hours Packaging hours 0.5 Total overhead costs and activity levels for the year are estimated as follows: Overhead costs Activity Direct labor Oven Packaging Activity levels ? hours 1,900 oven hours 950 packaging hours $210,000 $150,000 $360.000 Required: a. What are the total budgeted direct labor hours? b. Using a traditional system (with direct labor hours as the overhead allocation base): 1. compute the overhead or indirect cost rate per direct labor hour 2. compute the estimated overhead costs per thousand cookies for each type of cookie 3. compute the estimated operating profit per thousand cookies for each type of cookie 1. compute the overhead rate for each cost pool (oven and packaging) 2. compute the estimated overhead costs per thousand cookies for each type of cookie 3. compute the estimated operating profit per thousand cookies for each type of cookie d. Which products are over/under costed using the traditional costing system? e. Explain the difference between the profits obtained from the traditional system and the ABC system Which system provides a better estimate of profitability? Why? f. How many cost pools are needed for this company? Why