Dehli Inkstone specializes in inkstone creation. Each finished inkstone needs 1 pounds of special materials which cost $20 a pound. (One pound contains 16 ounces.) Drilling requires 1 direct labor hour for which workers are paid $10 per hour, and 40 minutes of machine time. The preliminary product (a basic') is inspected to ensure that it is sound. Fifteen percent of the basics are rejected. It is not possible to rework these, and they have no salvage value. Each approved stone is handed to a master craftsperson who spends two hours making a Standard' product or three hours creating a Masterpiece'. Standards use half an hour of machine time and Masterpieces one hour. Finished inkstones are inspected again before packing. Four percent of finished products fail the final quality control assessment and are destroyed. Crafts persons are paid $18 per hour. It takes a basic' worker six minutes to package each inkstone in bubble wrap and a shipping carton, which cost 50 cents in materials and weigh 6 ounces in total. Total overheads are estimated to be $587,400 per year and 97,900 direct labor hours are budgeted. Production plans for the year call for 60% of output to be Standard inkstones and the balance Masterpieces.

Q 2) Boulder Mountain manufactures two products, Standard and Deluxe. Boulder Mountains overhead consists of $5,000,000 for machining and $2,500,000 for assembly. The following information has been complied about the two products:

	Standard	Deluxe
Direct labor hours	10,000	15,000
Number of parts	90,000	160,000
Machine hours	10,000	30,000

Overhead allocated to Standard using a single overhead rate based on the number of parts and using activity-based costing, respectively, are:

Multiple Choice

A) $2,700,000 and $2,250,000.

B) $1,875,000 and $2,625,000.

C) $2,400,000 and $2,250,000.

D) $2,150,000 and $2,350,000.

E) $2,400,000 and $2,625,000.

Q 3) For Dehli Inkstone, is it worth implementing a full-fledged ABC system, based upon the findings for these two products?

Multiple Choice

A) No, for Standard the cost difference between using machine hours and ABC is less than 30 cents per unit, so adoption of the ABC system is not cost-beneficial

B) Yes, all of the single-base allocation systems over cost the Masterpiece

C) No, for Masterpiece the cost difference between using labor hours and ABC is less than 40 cents per unit, so adoption of the ABC system is not cost-beneficial

D) No, the ABC system has failed to reduce total overheads

E) No, the proportions of the different inputs consumed by each product are not sufficiently different to make ABC worthwhile

Please attempt only if you are willing to answer both of these questions.

Appreciate the help. Thank you!!