67% 01 + Question 2 (15 marks) Aunt Ethel's Fancy Cookie Company manufactures and sells three flavors of cookies: Macaroon, Sugar, and Buttercream in a continuous production process. The company acquires enough raw materials and labor hours necessary for making cookies. 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: Macaroon Sugar Buttercream Projected sales in units 500,000 800,000 600,000 PER UNIT data: Selling price $0.96 $0.9 $0.72 Direct materials $0.24 $0.18 $0.168 Direct labor $0.048 $0.024 $0.024 1 1 1 1 1 Hours per 1000-unit batch: Direct labor hours 2 Oven hours Packaging hours 0.5 0.5 0.5 The company used traditional cost allocation method to allocate overhead costs to different types of cookies based on direct labor hours used. Recently, senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows: .67% III 81 + Activity Oven Packaging Overhead activity costs $210,000 $150,000 $360,000 The activity bases quantity of usage identified for each activity are as follows: Activity Key Cost Driver Cost Driver Usage Oven oven hours 2,000 Packaging packaging hours 1,000 Required: (1) Using the ABC system, for the sugar cookie, the most popular cookie, compute the estimated overhead costs per thousand cookies. (6 marks) (2) Compute and compare the product cost per unit for sugar cookie under ABC method and traditional two-stage cost allocation method. (9 marks)