Assign P5-46B Prime Furniture designs and builds factory-made, premium, wood armoires for homes. All overhead are made of white oak. Its budgeted manufacturing overhead costs for the year 2012 are as costs follows. using traditional Overhead Cost Pools Amount costing Purchasing $ 40.000 and ABC; compare Handling materials 45.000 results. Production (cutting, milling, finishing) 130,000 Setting up machines 50.000 Inspecting 60,000 Inventory control (raw materials and finished goods) 80,000 Utilities 105,000 Total budget overhead costs $510,000 For the last four years, Prime Furniture has been charging overhead to products on the basis of materials cost. For the year 2012, materials cost of $500,000 were budgeted Wei Huang, owner-manager of Prime Furniture, recently directed her accountant, Tom Turkel, to implement the activity-based costing system that he has repeatedly proposed. At Wei Huang's request, Tom and the production manager identify the following cost drivers and their usage for the previously budgeted overhead cost pools. Activity Cost Expected Use of Cost Overhead Cost Pools Drivers Drivers Purchasing Number of orders 500 Handling materials Number of moves 5.000 Production (cutting, milling, finishing) Direct labour hours 65,000Activity Cost Expected Use of Cost Overhead Cost Pools Drivers Drivers Setting up machines Number of set-ups 1.000 Inspecting Number of 4,000 inspections Inventory control (raw materials and Number of 40,000 finished goods) components Utilities Square metres 5,000 occupied Maria Carvalho, sales manager, has received an order for 10 luxury armoires from Cohn's Interior Design. At Maria's request, Tom prepares cost estimates for producing components for 10 armoires so Maria can submit a contract price per armoire to Cohn's. He accumulates the following data for the production of 10 armoires. Direct materials $5.200 Direct labour $3,500 Direct labour hours 200 Number of purchase orders 3 Number of material moves 32 Number of machine set-ups 4 Number of inspections 20 Number of components 640 Number of square metres occupied 32 Instructions (a) Calculate the predetermined overhead rate using traditional costing with materials cost as the basis. (b) What is the manufacturing cost per armoire under traditional costing? (c) What is the manufacturing cost per armoire under the proposed activity-based costing? (Prepare all of the necessary schedules.) (d) Determine which of the two costing systems is preferable in pricing decisions and why