Haillie Inc. manufactures two products: A123 and B456. Of the two product lines, the B456 product line is more complex, requiring one hour of direct labour time per unit to manufacture, compared to 0.5 hours of direct labour time for one unit of the A123. The B456 product line is produced on an automated production line.

Currently, the company uses normal costing and allocates manufacturing overhead costs are to products on the basis of direct labour hours. The company estimates that manufacturing overhead will be $667,000 for 2023 and intends to produce 12,000 units of the A123 and 40,000 units of the B456. Estimated perunit costs are as follows:

	A123	B456
Direct labour	$18.00	$36.00
Direct materials	$24.00	$32.00

Required

(A) Compute the predetermined manufacturing overhead rate.

(B) Compute the amount of overhead the company expects to allocate to each product line.

(C) Compute the total manufacturing cost for each product line.

(D) Recently, the company's cost accountant has considered implementing an activity-based costing system. To help with this decision, the accountant gathered the following information:

Quantity of cost driver

Activity	Cost driver	A123	B456	Manufacturing overhead
Machine setups	Number of setups	1400	2,000	$306,000
Purchase orders	Number of orders	600	400	$55,000
Machining	Machine hours	10,000	22,000	$256,000
Maintenance	Maintenance requests	400	600	$50,000
				$667,000

Compute the activity-based costing rates for each activity.

(E) Compute the total manufacturing cost for each product line using activity-based costing.

(F) Discuss the differences in the costs determined from traditional costing (i.e., simply plantwide overhead rate) and activity-based costing. Which method provides a better estimate of production costs? Why?