Isadore’s Implements, Inc., manufactures pens and mechanical pencils often used for gifts. Overhead costs are currently allocated using direct labor-hours, but the controller has recommended an activity-based costing system using the following data:

					Cost Driver Volume
Activity	Costs Driver		Costs	Pencils		Pens
Setting up	Number of setups		$ 72.000	20		30
Inspecting	Number of parts		21.600	4		6
Packing and shipping	Number of boxes shipped		43.200	45.000		75.000
Total overhead			136.800

Required

Compute the amount of overhead to be allocated to each product under activity-based costing.

Compute the amount of overhead to be allocated to each product using labor-hours as the allocation base. Assume that the number of labor-hours required to assemble each box is 0,1 for pencils and 0,2 for pens and that 45.000 boxes of pencils and 75.000 boxes of pens were produced during the period.

Should the company follow the controller’s recommendations?