Assign overhead costs using traditional costing and ABC; compare results. 2P5.38A (LO 1, 2) Kiddy Company manufactures bicycles. It recently received a request to manufacture 10 units of a mountain bike at a price lower than it normally accepts. Bruce, the sales manager, indicated that, if the order were accepted at that price, the company could expect additional orders from the same client. Bruce believes that, if Kiddy could offer this price in the market generally, sales of this bike would increase by 30%. Melany, president of Kiddy, is skeptical about accepting the order. The company has a policy of not accepting any order that does not provide a markup of 20% on full manufacturing costs. The price offered is $575 per bike. The controller, Sanjay, has recently researched the possibility of using activity-based multiple overhead rates instead of the single rate currently in use. He has promised more accurate estimated overhead product costing, and Melany is curious about how this approach would affect product costing and pricing of the mountain bike. The plant-wide overhead rate is based on an estimated volume of 10,000 direct labour hours and the following budgeted overhead: Machine operating costs Rework labour Inspection Scrap costs General factory overhead $75,000 45,000 25,000 35,000 120,000 $300,000 Total Estimated activities for selected cost drivers for 2022: Machine hours Units reworked Inspection hours Units scrapped Direct labour hours Estimated data for the production of one mountain bike: Direct materials Direct labour (7.5 hours/unit) Number of machine hours Number of units reworked Number of inspection hours 25,000 600 500 140 12,000 $160 $180 6 0.25 0.10 0.05 Instructions Number of units scrapped a. Using the single-rate method to assign overhead on a plant-wide basis, determine whether or not Kiddy should accept the order for the 10 mountain bikes. Explain your decision. a. Price of bicycle: $678 b. Using activity-based costing to assign overhead, determine whether or not Kiddy should accept the order for the 10 mountain bikes. Explain your decision. b. Price using ABC: $563.10