Activity Based Costing versus Traditional Costing Problem. Currently Kingdom Industries is considering changing to an Activity Based Costing System due to increased sales, increased number of products, and a more complex manufacturing process with many activities. Kingdom Industries has the following overhead costs and cost drivers. Activity Cost Pools Ordering and Receiving Machine Setup Cost Driver Orders Estimated Overhead Cost Driver Activity $56,250 2,250 orders Setups $50,000 Machining Assembly Inspection Machine hours $600,000 10,000 setups 50,000 MH Parts $450,000 600,000 parts Inspections $1,280,000 40,000 inspections Traditional Cost Pool Direct Labor Hours $2,436,250 1,000 DL Hours 1: Compute the total overhead costs assigned to Product C using activity based costing: Activity Cost Pool Product C Activity (a) ABC Overhead Rate (Please See Tip 1 below) (b) Total Product C Overhead (Please See Tip 2 below) (a x b) Ordering and Receiving Machine Setup Machining Assembly Inspection 250 Orders 500 Setups 6,000 Machine hours 50,000 Parts 5,000 Inspections Using ABC costing, Total Overhead Costs assigned to Product C Tip 1: ABC Overhead Rate = Estimated Overhead / Cost Driver Activity Tip 2: Total Product C Overhead = Product C activity x ABC Overhead Rate 2: Compute the total overhead costs assigned to Product C using traditional costing: Traditional Costing Product C Activity Traditional Overhead Rate (Please See Tip 3 below) Total Overhead Costs (Please See Tip 4 below) (a) (b) (a x b) Traditional Cost Pool 150 DL Hours Tip 3: Traditional Overhead Rate = Estimated Overhead / Cost Driver Activity Tip 4: Total Product C Overhead = Product C activity x Traditional Overhead Rate 3: Compute and compare ABC Overhead Costs to Traditional Overhead Costs for Product C: Tip 3: Traditional Overhead Rate = Estimated Overhead / Cost Driver Activity Tip 4: Total Product C Overhead = Product C activity x Traditional Overhead Rate 3: Compute and compare ABC Overhead Costs to Traditional Overhead Costs for Product C: Product C OH Costs Current Traditional OH (a) Proposed ABC OH (b) Increase (Decrease) (b-a) 2. Instructions for Posting (200 to 300 words - 60pts): a. Based on the results for Product B Overhead for Traditional Costing and the proposed ABC Costing: 1-Would you recommend to change from Traditional Costing to ABC Costing for computing overhead? 2-Provide three reasons (explain advantages or disadvantages) for your decision. b. Explain Activity Based Costing and describe three activities for ABC costing. Include one advantage and one limitation in using ABC Costing in comparison to Traditional Costing. c. Explain and compare Unit Level Activities to Product Level Activities. Provide two examples for Unit Level Activities and two examples for Product Level Activities