Automatic Machines. is a distributor for slate products and has gathered the following information for two of their products:

	Supreme Machine	Regular Machine
Number of units	20,000 units	5,000 units
Total Revenues	1,500,000	500,000
Total Cost of goods sold	500,000	300,000

For the 2023 operating year, indirect costs were budgeted as $450,000 and are currently being allocating to customers using activity based costing. In preparation, they compiled the following data on these two customers:

Cost Pool	Cost	Cost Driver	Supreme	Regular	Total
Order processing	100,000	Number of orders	400	100	500
Assembly	150,000	Number of assembly hours	2,500	1,500	4,000
Cutting	200,000	Number of Man hours	4,000	1,000	5,000
Total	450,000

Required:

a. Using Activity based costing determine the cost of the indirect cost that should be allocated to each product.

Cost Pool

Order processing

Assembly

Cutting

Total

b. Explain why a company would use activity-based costing? Also why would a company use plant wide rate?