High Anxiety Ltd produces specialized equipment. Currently, overhead costs are allocated at a rate of INR 50 per machine hour produced and the company used 2,000 machine hours last year. High Anxiety's CEO has heard about ABC, and would like to see if it makes any difference in the costs allocated to jobs at the company. The accounting staff has provided the following information about manufacturing overhead:

Cost Pool

Amount (INR)

Cost Driver

Setups

30,000

Number of setups

Equipment

20,000

Number of machine hours

Inspection

50,000

Number of inspections

The company estimates that it will perform 150 setups and 1,000 inspections each year and will use 2,000 machine hours.

Job FWS will require 18 setups, 85 machine hours, and 60 inspections.

a.Using ABC, what amount of manufacturing overhead will be allocated to Job FWS?

b.What amount would High Anxiety Ltd allocate to job FWS using their current, traditional system?

c.Why do the two methods yield such different answers?