and Activity-Based Costing Product Maro Chapter 7 Activity-Based Costing: A Tour singles PROBLEM 7-23 Comparing Traditional and Activity-Based Costing Pre [LOI, LO3, L04] Modern Tools makes two types of chain saws---High Grade and Professional product lines appear below: High Grade Professional $215.50 $ 83.50 $ 30.00 1.0 DLHS 75,000 units $387.00 $212.00 $ 45.00 Selling price per unit.......... Direct materials per unit.. Direct labour per unit ....... Direct labour-hours per unit ... Estimated annual production and sales. ... 1.5 DLHS 25,000 units Goverhead is applied to units w y The company has a traditional costing system in which manufacturing overhead: based on direct labour-hours. Data concerning manufacturing overhead and direct labo upcoming year appear below: $1,350,000 112,500 DLHs Estimated total manufacturing overhead..... Estimated total direct labour-hours......... ... Required: 1. Using Exhibit 7-14 as a guide, compute the product margins for the High Grade and the Professional products under the company's traditional costing system. The company is considering replacing its traditional costing system with an ABC system thal would assign its manufacturing overhead to the following four activity cost pools (the Other cost pool includes organization-sustaining costs and idle capacity costs): Expected Activity Estimated Overhead Cost High Total Activities and Activity Measures Grade Professional 112,500 37,500 350 $ 573,750 621,250 75,000 75 275 Supporting direct labour (direct labour-hours)... Batch setups (setups).... Product-sustaining (number of products).......... Other .... Total manufacturing overhead cost...... 1 1 110,000 45,000 $1,350,000 NA NA Using Exhibit 7-12 as a guide, compute the product margins for the products under the ABC system. Explain why and how the traditional and activity-based cost assignmen irgins for the High Grade and Pre ide and Professional 3. cost assignments differ