Loki Electronics Ltd is an electronics company that manufactures mobile phones. As a result of the competitive nature of the electronics market, Loki Electronics Ltd provides extensive product-related after-sales services to its customers (e.g., distribution and after-sales support activities).

Loki Electronics Ltd is currently using a volume-based costing (VBC) system. Ms Amanda Carter, Loki Ltds CFO, is contemplating changing to an Activity Based Costing (ABC) system.

Loki Electronics Ltds Mobile Phone division produces five models of mobile phones. The following information has been provided for the month of January just ended:

The VBC information collected for the month just ended are as follows.

*Overhead = $$108,000; allocated on the basis of total units of phones produced
Mobile phones Models	X400	X500	X600	X700	X800	Total
Mobile phones produced	200	250	400	900	250	2000
Conventional Costing	X400	X500	X600	X700	X800	Total
	$$	$$	$$	$$	$$	$$
Direct Materials	14,000	17,5000	28,000	63,000	17,500	140,000
Direct Labour	16,000	20,000	32,000	72,000	20,000	160,000
Overhead Cost applied*	10,800	13,500	21,600	48,600	13,500	108,000
Total Manufacturing Cost	40,800	51,000	81,600	183,600	51,000	408,000
Cost per phone	204	204	204	204	204

The cost of resources and resource drivers collected for the month just ended are as follows.

Resources	$$	Resource Drivers	Quantity of Resource Drivers
Salaries	48,000	No. of employees	12
Assembly machine depreciation	60,000	No. of assembly hours	6,000
Testing equipment depreciation	16,000	No. of testing hours	2,000
Motor vehicle costs	60,000	No. of kilometres travelled	10,000
	154,000

Three main activities and their activity drivers for the Mobile Phone Division are identified as follows:

Activities	No. of Resource Drivers Consumed	Activity Drivers	Activity Cost ($)($)
Assembly setup	6000 Assembly hours	No. of production batches	84,000
	6 Employees
Quality testing	2 Employees	No. of mobile phones produced	24,000
	2000 Testing hours
Distribution & customer support	10000 Kilometres travelled	No. of distribution batches	46,000
	4 Employees

Quantity of Activity Drivers	X400	X500	X600	X700	X800	Total
Number of phones	200	250	400	900	250	2000
Number of production batches	4	5	2	4	5	20
Number of distribution batches	2	1	3	1	3	10

Required:

Should Loki Electronics implement an ABC system? Please apply the first three of the four criteria that you were taught. For the purpose of this question, you will only need to provide the required calculations and conclude.