Volume Overhead Cost Activity Purchasing Purchase orders $150,000 Receiving Shipments received 60,000 Machine setups Setups 200,000 Quality control Inspections 90,000 Direct materials are $15 per unit for luxury handbags and $11 per unit for deluxe handbags. There were 12,500 direct labor hours, each of which was charged to inventory at $18 per hour. Required: Allocation Base of Activity A. Management is trying to decide between using the traditional allocation method based on direct labor hours and using activity-based costing. Calculate the overhead rates for each method. Overhead Cost 320 per direct labor hour Traditional allocation Activity-Based Costing: Purchasing Receiving Machine setups Quality control Traditional allocation $ Activity-Based Costing: Purchasing Receiving Machine setups Quality control Total C. Select $ $ $ 30,000 15,000 2,500 18,000 $ B. One particular batch of 40 luxury handbags had the following specifications: Direct labor hours Purchase orders Shipments received Setups Inspections Calculate the overhead to be allocated to the bags under the traditional and activity-based costing techniques. Overhead Cost per purchase order per shipment per setup per inspection. $ $ $ 000 8 4 3 2 12 allocates overhead to products on the basis of the activities that cause overhead costs to be incurred. Select results in more accurate product costing.