arse H Noriko Fujita is the controller of Nakamura, Inc., an electronic controls company located in Yokohama She recently attended a seminar on activity-based costing (ABC) in Tokyo. Nakamura's traditional cost accounting system has three cost categories: direct materials, direct labor, and indirect production costs. The company allocates indirect production costs on the basis of direct-labor cost. The following is the 20X0 budget for the gnme automotive controls department in thousands of Japanese yen): Click the icon to view the 20x0 budget) After Ms. Fujita attended the Automotive Controls Depart department and selected ac (Click the icon to view th In 20xo the Automotive Cont hours, and ship 7,900 boxes Read the requirements Ty Pla ults Requirement 1. Explain how Nakamura, Inc., allocates its indirect production costs using its traditional cost system. Include a computation of the The traditional cost system allocates indirect production costs based entirely on direct labor cost. son Select the formula(s) and then calculate the indirect cost rate(s) under the traditional cost system. (Only use as many lines as needed to show the decimal places, XX.) men Indirect cost rate formula Indirect cost rate 4 Indirect production costs med Direct labor cost 0.4 per direct labor yen cer Requirement 2. Explain how Nakamura, Inc., would allocate indirect production costs under Ms. Fujita's proposed ABC system. Include a comput auni The ABC system allocates indirect production costs separately for each activity Select the formula(s) and then calculate the Indirect cost rate(s) under the ABC system (Only use as many lines as needed to show the indirecte XX) Indirect cost rate formula Indirect cost rate Shipping costs yen per box shipped After Ms. Fujita attended the seminar, she suggested that Nakamura experiment with an ABC system in the Automotive Controls Department. She identified four main activities that cause indirect production costs in the department and selected a cost driver to use as a cost-allocation base for each activity as follows: (Click the icon to view the ABC data) In 20x0 the Automotive Controls Department expects to produce 96,000 control units, use 640 quality control hours, and ship 7,900 boxes. Read the requirements. - X i Data Table Direct materials 50,000 Direct labor 54,415 Indirect production costs 41,766 put Total cost 126,181 Et co Print Done cost rate Data Table - Cost-Allocation Base Predicted 20x0 Cost (000) 3,500 Direct materials cost Activity Receiving Assembly Quality control Number of control units 10,560 QC hours ec 2,176 5,530 Shipping Number of boxes shipped or e 21,766 TOTAL und Print Done Requirements 1. Explain how Nakamura, Inc., allocates its indirect production costs using its traditional cost system. Include a computation of the allocation rate used. 2. Explain how Nakamura, Inc., would allocate indirect production costs under Ms. Fujita's proposed ABC system. Include a computation of all the allocation rates used. 3. Suppose Nakamura prices its products at 25% above total production cost. An order came in from Mazda for 2,000 control units. Fujita estimates that filling the order will require 5,500,000 of direct-materials cost and 1,500,000 of direct labor. It will require 60 hours of QC inspection time and will be shipped in 600 boxes. a. Compute the price charged for the 2,000 control units if Nakamura uses its traditional cost accounting system b. Compute the price charged for the 2,000 control units if Nakamura uses the ABC system proposed by Ms. Fujita. 4. Explain why costs are different in the two costing systems. Include an indication of which costs you think are most accurate and why