E18-5 Perdon Corporation manufactures safes-large mobile safes, and large walk-in sta tionary bank safes. As part of its annual budgeting process, Perdon is analyzing the profit- ability of its two products. Part of this analysis involves estimating the amount of overhead to be allocated to cach product line. The following information relates to overhead. Mobile Safes Walk-In Safes 50 200 Units planned for production Material moves per product line Purchase orders per product line Direct labor hours per product line 200 300 450 800 350 1,700 Instructions (a) The total estimated manufacturing overhead was $260,000. Under traditional costing (which assigns overhead on the basis of direct labor hours), what amount of manufac turing overhead costs are assigned to (1) One mobile safe (2) One walk-in safe? (b) The total estimated manufacturing overhead of $260,000 was comprised of S160,000 for materials handling costs and $100,000 for purchasing activity costs. Under activity-based costing (ABC): )What amount of materials handling costs are assigned to (a) One mobile safe? (b) One walk-in safe (2) What amount of purchasing activity costs are assigned to (a) One mobile safe? (b) One walk-in safe? (c) Compare the amount of overhead allocated to one mobile safe and to one walk-in safe under the traditional costing approach versus under ABC (a) Traditional Costing Traditional Costing Formula: (Total Cost / Total Hours) Srate per DLH (direct labor hour a1) ONE MOBILE safe overhead cost is: (Direct Labor Hours x Rate per DLH) then divided by ?7? a2) ONE WALK-IN safe overhead cost is: (b) Activity Based Costing Materials Handling costs: A-B-C Formula.. (Total Material Handling Cost / Total # Moves) $per move (1a) ONE MOBILE safe materials cost is (1b) ONE WALK-IN safe materials cost is: A-B-C Formula or Materials (Total Material Handling Cost Total # Moves ) = $ per move (1a) ONE MOBILE safe materials cost is: (1b) ONE WALK-IN safe materials cost is: Purchasing Activity costs: A-B-C Formula ...or Activites: (2a) ONE MOBILE safe purchasing activities cost is: (2b) ONE WALK-IN safe purchasing activities cost is: (c) Comparison: Traditional vs Activity-Based Costing Recap: The overhead allocated to each unit of the two products is: Activity Based Costing Traditional UNIT Costs Costing Mobile Safe Walk-in Safe