Magazine Life develops magazines quarterfy across a varieby of topics. ML is constanty creating new magazines in order to meet new trends. The market is very compestive. and ML's competitors continue to introduce new magazines at historical prices despite rising inflationary costs (sometimes lower than ML can ofler). The nature and type of the magazine can require significant investments in overhead (i.e. edtors fime, fachchecking. etc.) and therefore their larpest cost tends to be overthead based. The key distinction for ML. is there are large overthead costs that are incurred on the creation of the content instead of per unit. ML. recently hired Jared Wright, a recent accounting graduate. Jared came from a competotor in the magazine business and was constantly working in their costing department, drectly on their ABC meshod. Jared asked the Magaxine Development Department Manager Jacob Zine to join him in a piot activity-based costing stuoy Jared and Jacob identified the following key activities, relaled costs, and cost allocation baser. ML. is planning to develop the following new magazines: - Classic Cars 2024. This magazine is based on select classic cars from the 1970s. This is a new magazine that has not been previously run - Video Garre Action 2023 Season. This magsine showcases the recent hir videc games. This magazine is nun each year, updaled based on the new trending game. Classic Cars will require more editing and fact-checking hours than normal, since irs a new style, consisting of 30,000 hours and 15,000 hours, respectively. Video Game Action has been a repetitive issue for ML and as a result it has been fine tuned to only require 10,000 of edifing time and 8,000 hours of factichecking. ML expects printing of Video Game Action to be the normal level of 500.000 magazines, whle Classic Cars is anticipating to printsel 25% less than normal. Classic Cars is primarly focised on showcasing the vehicles, as such e is peinarly images vs text and it is shorter than a nomal magazine reguiring only one minube to complete grinting in comparison to the Video Game Action magarine which takes the norral three minutes to print per magazine. Requirements: 7.1 Compule the cost allocation rate for each activity 7.2 Use the activity-based cost allocation rates to compute the indirect cost of each unit of Classic Cars and Video Game Action. (Hint Compute the total activity costs allocated to each product line and then compute the cont per unit. 7.3ML's original single-allocation-base costing system allocated indirect costs to magazines at $80 per direct labour hour spent to prepare the magazines aher printing. Classic Cars requires 75.000 labour hours, while Video Game Action requires 62,500 labour hours. Compule the total indirect costs alocated to Classic Cars and Video Game Action under the originat system. Then, compule the indirect cost per unit for each product. 7.4 Compare the activify-based costs per unit to the costs from the simpler oringil system. How have the unit costs changed? Explain why the costs changed as they did, Do you think it is worthwhile to implement this system
