Activity 2 Crimson Components Company: The Redwood City plant of Crimson Components Company makes 2 types of rotators, R361 ad R572, for automobile engines. The old cost accounting system at the plant traced overhead costs to 4 cost pools: Cost Pool Overhead Allocation Base 81 Setups $1,176,000 Direct labour cost 82 Maintenance 1,120,000 Machine Hours P1 Casting 480,000 P2 Machining 780 000 $3,556,000 Pool 81 included service activity costs related to setups, production scheduling, plant administration,janitorial services, materials handling. and shipping. Pool 82 included overhead costs related to machine maintenance and repair, rent, insurance, power, and utilities. Pools P1 (Casting) and P2 (Machining) included supervisors' wages, idle time, and indirect materials for the 2 production departments, casting and machining, respectively. The old accounting system allocated overhead costs in Pools 81 and S2 to the 2 production departments using the direct labour cost and machine hours. respectively, as the bases. Then the accumulated overhead costs in pools P1 and P2 were applied to the products on the basis of direct labour hours. A separate rate was determined for each of the 2 production departments. The direct labour wage rate is $15 per hour in casting and $18 per hour in machining. Direct Labour Hours (DLH) and Cost {$) Department R361 R572 Total Direct Labour Cost Casting (P1) l00,000 20,000 80,000 $1,200,000 Machining (P2) 72 000 48 000 120 000 $2,160,000 132 000 68,000 200 000 $360,000 Machine Hours (MI-l] Department R361 R572 Total Casting (P1) 30,000 10,000 40,000 Machining (P2) 72 000 48 000 120 000 102 000 58 000 160 000 R361 R572 Sales price per unit $19 $20 Sales units 500,000 400,000 Number of orders 1,000 1,000 Number of setups 2,000 4,000 Materials cost per unit $8 $10 Now the plant has implemented an activitybased costing system. The following table presents the amounts from the old cost pools that are traced to each of the new activity cost pools