A B C E F G H 6 7 Your company previously used a cost system that allocated all factory overhead costs to products based on direct labor hours. This year the company expected to incur 79,000 direct labor hours. It actually 9 incurred 60 direct labor hours when manufacturing Product Z. The company has just implemented an 10 ABC system that traces indirect costs to products based o: consumption of major activities as indicated 11 below. 8 12 Expected Cost Expected Actual Product Z Cost 13 Activity 14 Machining 15 Setup 6 Production order 7 Material handling 8 Parts administration Driver Driver Consumption Cost 99,000 hours 100,000 hours 66,000 hours 57,000 hours 97,000 orders 97,000 orders 13,000 requisitions 81,000 parts 23,000 requisitions 81,000 parts ABC dy Type here to search W Font Alignment Number Styles Cells D14 A B E F G H 25 26 1. Compute the overhead applied to Product Z using the traditional volume-based system. 27 28 0 2. Compute the overhead applied to Product Z using the new ABC system. 1 2 4 3. How much overhead would you apply to Product Z if you wanted your product cost to be more 5 accurate? Why that amount? 7 ady Type here to search .00 0 Fo Number L Estimated OH Costs Cost Activity Amount Phone Parts administration 2000 Other Utilities Machining 6000 Utilities Parts administration 6000 Utilities Setup Materials handling 6000 Utilities 8000 Supplies Parts administration 8000 Utilities Production order 8000 Depreciation Setup 9000 Setup Area Rent Setup Machining 11000 Maintenance 12000 Area Rent Parts administration 20000 Supplies Supervisor Salary Admin processing Supervisory Salary Production order 22000 Machining 25000 Parts administration 26000 Setup 35000 37000 Area Rent Production order Supervisor Salary Electricity Parts administration 45000 Machining Materials handling Machining Machining 60000 Area Rent 84000 Depreciation Machine Shop Rent 85000 148000 IN