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Docks Inc. has been using a traditional costing system and would like to try the Activity Based Costing system instead. The total overhead of the
Docks Inc. has been using a traditional costing system and would like to try the Activity Based Costing system instead. The total overhead of the company is $420,000 and the labour rate is $20 per hour. Under the traditional costing system, the overhead was allocated based on DL Hours and under the Activity Based Costing System, the following activities and cost pools were identified: Predetermined OH rate $5 per DL Hour Estimated Activity 50.000 DL DL hours hours 30.000 Machine machine Hours hours Number of 20.000 Orders orders $3 per machine hour $4 per order One of the clients of Docks Inc. required usage of 2,000DL hours; 3,000 machine hours and placed 800 orders. One of the clients of Docks Inc. required usage of 2.000DL hours: 3,000 machine hours, and placed 800 orders. Would this job have been over-costed or under-costed under the traditional system and by how much
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