Calculation

(B) Activity Based Costing Kate Limited, manufactures plastic and ceramic outdoor dinnerware. The company's western plant has changed from a manual-labour operation to a robotics-intensive environment. As a result, management is considering moving from a direct-labour-based overhead rate to an activity-based costing system. The controller has chosen the following activity cost pools and cost drivers for factory overhead: Overhead Cost Information Cost Driver Driver Activity Purchase orders $200 000 Number of orders 25 000 Setup costs 300 000 Number of setups 15 000 Testing costs 420 000 Number of tests 16 000 Machine maintenance 800 000 Machine hours 50 000 Required 1. Calculate the overhead rate for each cost driver. 2. An order for 50 ceramic dish sets had the following requirements: Number of purchase orders 3 Number of setups 20 Number of product tests Machine hours 150 How much overhead should be assigned to this order? 3. Discuss why using an activity-based system could provide better information to decision makers regarding the setting of sales prices. What other advantages might Kate Limited realise from the new costing system