LO 1,3,4,7 (Appendix) 5-35 Comparison of two costing systems, original activity-based costs, implementing change The Redwood City plant of Crimson Components Company makes two types of rotators for automobile engines: R361 and R572. The old cost accounting system at the plant traced support costs to four cost pools: CoST PoOL Cost DRIVER Direct labor cost Machine hours SUPPORT COSTS S1 S2 P1 P2 $1,176,000 1,120,000 480,000 780,000 $3,556,000 Pool S1 included service activity costs related to setups, production scheduling, plant admin istration, janitorial services, materials handling, and shipping. Pool S2 included activity costs re- lated to machine maintenance and repair, rent, insurance, power, and utilities. Pools P1 and P2 included supervisors' wages, idle time, and indirect materials for the two production departments, casting and machining, respectively. The old accounting system allocated support costs in pools S1 and S2 to the two production de- partments using direct labor cost and machine hours, respectively, as the cost drivers. Then the ac- cumulated support costs in pools P1 and P2 were applied to the products on the basis of direct labor hours. A separate rate was determined for each of the two production departments. The direct la- bor wage rate is $15 per hour in casting and $18 per hour in machining MACHINE HOURs (MH) R361 30,000 72,000 R572 10,000 48,000 58,000 TOTAL 40,000 120,000 160,000 DEPARTMENT Casting (P1) Machining (P2) Total 102,000 ITEM R361 R572 Sales price per unit Sales and production units Number of orders Number of setups $19 500,000 1,000 2,000 $8 $20 400,000 1,000 4,000 aterials cost per unit Now the plant has implemented an activity-based costing system. The following table presents the amounts from the old cost pools that are traced to each of the new activitv cost pools